In the
United States Court of Appeals
For the Seventh Circuit
No. 10-1336
JUNE K IMMEL, individually and as
Personal Representative of the
Estate of Richard Kimmel,
Plaintiff-Appellant,
v.
W ESTERN R ESERVE L IFE A SSURANCE
C OMPANY of O HIO ,
Defendant-Appellee.
____________
Appeal from the United States District Court
for the Northern District of Indiana, Hammond Division.
No. 2:08-cv-00055-PRC—Paul R. Cherry, Magistrate Judge.
____________
A RGUED S EPTEMBER 22, 2010—D ECIDED N OVEMBER 23, 2010
____________
Before M ANION, T INDER, and H AMILTON, Circuit Judges.
H AMILTON, Circuit Judge. On November 13, 2006, Richard
Kimmel applied for a $500,000 life insurance policy from
Western Reserve Life Assurance Company and paid an
initial premium. In return for his application and payment,
he received a conditional receipt. Both Richard’s applica-
2 No. 10-1336
tion and the conditional receipt contained a clause that
expressly terminated after 60 days any life insurance
coverage provided by the company pending its review of
Richard’s application. Sixty days then passed without
Western Reserve either accepting or rejecting Richard’s
application. On February 26, 2007, Richard was killed in an
automobile accident. Richard’s widow June Kimmel sought
benefits under the terms of the conditional receipt. When
Western Reserve denied her claim, June brought this suit.
The district court granted Western Reserve’s motion for
summary judgment, finding that the conditional receipt
expired on its own terms and that Western Reserve had not
acted in bad faith under Indiana law. The court denied as
moot June’s motion for summary judgment on Western
Reserve’s defense of material misrepresentation. June has
appealed from the judgment. We review de novo decisions
made at the summary judgment stage. See Franklin v. City
of Evanston, 384 F.3d 838, 843 (7th Cir. 2004). In doing so,
“we draw all reasonable inferences from the evidence in
the light most favorable to the nonmoving party.” Id.,
quoting Williamson v. Indiana University, 345 F.3d 459, 462
(7th Cir. 2003). We affirm.
I. Conditional Receipt
Because we find that the express language of the condi-
tional receipt controls June’s claim for benefits, we begin
there. The relevant facts are undisputed.
The application Richard submitted to Western Reserve
was five pages long and contained the following language:
No. 10-1336 3
The Company shall have sixty days from the date
hereof within which to consider and act on this appli-
cation and if within such period a policy has not been
received by the applicant or notice of approval or
rejection has not been given, then this application shall
be deemed to have been declined by the Company.
The language was on the last page of the application,
which was also the signature page. When he submitted his
application, Richard also paid a $385 premium. In return,
he received a one-page conditional receipt that disclosed
the following terms:
. . . The policy you applied for will not become
effective unless and until a policy contract is de-
livered to you and all other conditions of coverage are
met. . . .
***
Any conditional coverage provided by this Receipt will
terminate on the earliest of: (a) 60 days from the date
the application was signed; (b) the date the Company
either mails notice to the applicant of the rejection of
the application and/or mails a refund of any amounts
paid with the application; (c) when the insurance
applied for goes into effect under the terms of the
policy applied for; or (d) the date the Company offers
to provide insurance on terms that differ from the
insurance for which you have applied.
***
If one or more of this Receipt’s conditions have not
been met exactly . . . the Company will not be liable
4 No. 10-1336
except to return any payment made with the applica-
tion.
If the Company does not approve and accept the
application for insurance within 60 days of the date
you signed the application, the application will be
deemed to be rejected by the Company and there will
be no conditional insurance coverage. In that case, the
Company’s liability will be limited to returning any
payment(s) you have made upon return of this Receipt
to the Company.
. . . This Receipt does not provide any conditional
insurance until all the conditions and requirements are
met as outlined above.
The 60-day limit of coverage expressed in the application
and in the conditional receipt expired on January 12, 2007.
By that time, Western Reserve had not accepted or denied
Richard’s application (or taken much action on his applica-
tion at all, as described below). Richard died on February
26, 2007. On July 23, 2007, Western Reserve returned the
premium Richard had paid with his application, with
interest.1
1
Although its denial letter reserved “any rights and defenses,”
Western Reserve’s letter relied on its belief that Richard’s
application contained material misrepresentations to deny
benefits, and did not rely on the express limiting language
contained in the application and conditional receipt. We do not
believe that any inferences can or should be drawn from this
fact, but it does seem odd that Western Reserve’s first response
(continued...)
No. 10-1336 5
An insurance policy is interpreted as any other contract.
See Hoosier Insurance Co. v. Audiology Foundation of America,
745 N.E.2d 300, 307 (Ind. App. 2001); Smith v. Allstate
Insurance Co., 681 N.E.2d 220, 223 (Ind. App. 1997). Where
there is no ambiguity in a contractual provision, that
provision’s plain language controls. Burress v. Indiana
Farmers Mutual Insurance Group, 626 N.E.2d 501, 505 (Ind.
App. 1993), citing Brunner v. Economy Preferred Insurance
Co., 597 N.E.2d 1317, 1319 (Ind. App. 1992). Ultimately, the
court’s role is to “give effect to the intent and reasonable
expectations of the parties as expressed in the contract,”
and does not extend to changing the contract’s terms.
Colonial Penn Insurance Co. v. Guzorek, 690 N.E.2d 664, 669
(Ind. 1997). June argues that this longstanding tenet of
Indiana law, that the plain language controls, is tempered
by other Indiana cases holding that, until a life insurance
company notifies an applicant during his lifetime that his
application has been denied and returns his premium, the
insurer cannot terminate insurance coverage regardless of
the plain language. We disagree with this view of Indiana
law.
In making her argument, June relies primarily on two
Indiana cases. The first, Kaiser v. National Farmers Union Life
Insurance Co., 339 N.E.2d 599 (Ind. App. 1976), indeed held
that an insurance company could not terminate life insur-
1
(...continued)
was a full-blown investigation of Richard’s application rather
than the more cost-effective path of relying first on the 60-day
limit.
6 No. 10-1336
ance coverage under a conditional receipt unless, within
the applicant’s lifetime, it had both notified the applicant
of its denial and returned the applicant’s premium. Kaiser,
who was 20 years old at the time, applied for a term life
insurance policy and paid the first quarterly premium due
on the policy. Due to his age, the insurance company’s
agent told Kaiser that he could not purchase a term policy
but instead could apply for a whole life policy. He did so,
tendering an additional premium and receiving a condi-
tional receipt, but he was killed in an accident before the
company formally accepted or denied his application. The
court in Kaiser found that the conditional receipt created a
contract for temporary interim life insurance subject to the
company’s rejection of Kaiser’s application. Because the
company did not reject Kaiser’s application prior to his
death, it was liable for the benefit stated in the application.
As the court explained:
any conditions contained in the receipt are to be
treated as conditions subsequent thereby compelling
an insurer to act affirmatively or negatively on the
application. Moreover, where an applicant is not
acceptable, he must be notified and the premium
returned. An insurer cannot terminate the risk so
assumed unless the applicant is so notified in his
lifetime.
Kaiser, 339 N.E.2d at 627-28. The second case on which June
relies, Monumental Life Insurance Co. v. Hakey, 354 N.E.2d
333, 334 (Ind. App. 1976), looked to Kaiser and echoed its
holding in finding that a contract existed and the insurer
was liable for the benefits stated in Hakey’s application
No. 10-1336 7
where the company had not notified Hakey of the need for
a medical examination within his lifetime, it had accepted
his premium, and it had issued a receipt.
Kaiser and Hakey do not control here. The applicants for
life insurance in those cases did not receive a conditional
receipt that expressly terminated interim coverage at the
expiration of a specified time period, as did the conditional
receipt that Richard received from Western Reserve. We
relied on precisely that distinction in Hornaday v. Sun Life
Insurance Co. of America, 597 F.2d 90 (7th Cir. 1979), which
also applied Indiana law. Hornaday applied for life
insurance from Sun Life, paid a premium, and received a
conditional receipt in exchange. One condition of the
conditional receipt was that the insurance provided by the
receipt terminated after 60 days. Sun Life accepted
Hornaday’s application and issued the policy, but the
company was unable to deliver the policy to (and to collect
the full premium from) Hornaday in spite of several
attempts to do so. Hornaday then died after the 60-day
time limit for the conditional receipt had expired.
Hornaday’s widow sought benefits under the conditional
receipt.
Relying on Hakey and Kaiser as June does here,
Hornaday’s widow argued that under Indiana law, an
insurance company could terminate a temporary insurance
contract only if the company notified the applicant of the
termination within the applicant’s lifetime and returned
the premium the applicant had paid. See Hornaday, 597
F.2d at 92. Because the insurer had satisfied neither of
those requirements, Hornaday’s widow argued that the
8 No. 10-1336
insurer was on the hook for coverage regardless of the
expiration of the time limit in the conditional receipt. The
insurer, in turn, argued that Barr v. The Insurance Co. of
North America, 61 Ind. 488 (1878), controlled. Barr dealt
with interim fire insurance under a conditional receipt that
stated it would expire 30 days from the date of the insur-
ance application. The loss occurred before the insurer made
a decision to issue or deny a policy, but after the 30 days
had run. The Barr court held that the insurance company
was not liable because “the written contract of assurance
expired by its own limitation, before the loss occurred.”
Barr, 61 Ind. at 493.
Looking to Kaiser, Hakey, and Barr, we explained in
Hornaday that if the insurer had wanted to terminate
coverage within the 60-day period of the conditional
receipt, it would have been required to give notice of
termination and return the premium Hornaday had paid.
Otherwise, Hornaday’s premium and application provided
him with life insurance for only 60 days. Hornaday did not
pay a premium for insurance beyond 60 days, and the
insurer did not deliver the life insurance policy. Therefore,
Hornaday’s coverage terminated when the conditional
receipt expired. Because Hornaday died outside of the
coverage period, his widow was not entitled to benefits
under the conditional receipt. Hornaday, 597 F.2d at 93-94.
Kaiser and Hakey stand for the general proposition that an
insurance company cannot accept an application and a
premium from an applicant, giving the applicant reason to
believe he is insured, and then, when the worst happens,
avoid liability by asserting that the applicant was not an
No. 10-1336 9
insurable risk after all. In that scenario the insurer would
have accepted a premium without accepting any risk, an
outcome that Kaiser and Hakey recognized, of course, to be
patently unfair. The public policy underlying these cases
does not extend, however, to a case such as this in which
the conditional receipt (and here, the application also)
contains express and unambiguous language limiting
interim coverage to a specific time period, as in Barr.
Although Barr is over 130 years old, it is still good law in
Indiana. It is consistent with Indiana contract law and is
not inconsistent with the public policy expressed in Kaiser
and Hakey. Based on the plain language of the application
and the conditional receipt, we do not believe that Richard
could have had any reasonable expectation of insurance
coverage after the expiration of the 60-day period. Accord-
ingly, as in Hornaday, the express termination of the
conditional receipt after 60 days is controlling. We affirm
the grant of summary judgment on this ground.
II. Material Misrepresentation
In its July 23, 2007 letter denying June’s claim for bene-
fits, Western Reserve stated that it believed that Richard’s
application contained “misrepresentations material to the
risk that Western Reserve was asked to assume.” When
June brought suit, Western Reserve raised “material
misrepresentation” as an affirmative defense. The parties
filed cross-motions for summary judgment on the affirma-
tive defense. Having found that any coverage provided by
the conditional receipt expired after 60 days, the district
court found it unnecessary to address whether Richard
10 No. 10-1336
made material misrepresentations about his health that
might have voided his coverage. June argues that the
district court erred by not granting her motion for sum-
mary judgment on this defense. We agree with the district
court that any insurance coverage Richard might have had
expired with the conditional receipt, and Western Reserve
is not liable to June for death benefits for that reason. We
need not determine either as a matter of law or fact
whether Richard made misrepresentations and whether
those misrepresentations were sufficiently material to void
his coverage. The issue remains moot on appeal.
III. Bad Faith
Indiana law recognizes that there is a legal duty implied
in all insurance contracts that the insurer deal in good faith
with its insured. See Erie Insurance Co. v. Hickman,
622 N.E.2d 515, 518 (Ind. 1993). The duty arises out of the
“special relationship” that exists between the insurer and
the insured, which at times is contractual and arms-length
but can also be fiduciary in nature. See id. Under Indiana
law, a breach of that fiduciary duty can give rise to a tort
claim for the insurer’s failure to deal with its insured in
good faith. See id. at 519. June alleged that Western Reserve
breached its duty of good faith. The district court granted
Western Reserve’s motion for summary judgment on
June’s bad faith claim.
On appeal, June argues that Western Reserve’s allegedly
shifting reasons for denying benefits under the policy
were, for various reasons, “pretextual, irrational and
unprincipled.” June Br. at 45-50. But, having found that
No. 10-1336 11
any coverage under the conditional receipt expired on its
own terms at the end of 60 days and that Richard was
uninsured on his date of death, we need not address this
argument. June also contends that Western Reserve’s
failure to take even basic steps toward processing Rich-
ard’s application for life insurance during his lifetime also
amounted to tortious bad faith. Western Reserve has
offered no explanation of its failure to process Richard’s
application. Its conduct in this case looks like a poor way
to run an insurance company. Nevertheless, we find that
Indiana law does not support (at least not yet) a bad faith
claim brought by an applicant for insurance based on the
insurer’s handling of the application.
In Richard’s life insurance application, dated
November 13, 2006, he disclosed that he had been treated
for bipolar disorder after being diagnosed in September
2005, that he was taking medication for his condition, and
that his attending doctor was Dr. Nasr. He provided Dr.
Nasr’s office address. On November 27, 2006, Western
Reserve advised Richard Newcomb, the agent who had
accepted Richard’s application on behalf of the company,
that it needed a blood test, Richard’s vital signs, and his
motor vehicle records. The test results and the requested
documents were provided. On December 8, 2006, Western
Reserve requested Dr. Nasr’s records through an interme-
diary, Examination Management Services, Inc. A member
of Dr. Nasr’s office staff informed Management Services
that an administrative copying fee of $20.55 and a HIPAA-
compliant release form were needed before Dr. Nasr’s
office could release the records. On December 22, 2006,
Dr. Nasr’s office called Richard and told him that a new
12 No. 10-1336
authorization form was needed before it could release his
records. June and Richard immediately went to Dr. Nasr’s
office and Richard signed the required authorization. The
records were then available to either Western Reserve or
Management Services upon payment of the nominal
copying fee.
Apparently unaware that the Kimmels had provided the
requisite authorization, Western Reserve contacted New-
comb on December 26, 2006, and advised him that Dr.
Nasr’s office needed a new authorization. After that, the
next action Western Reserve took on Richard’s application
was to instruct Management Services to close its file
without securing Dr. Nasr’s records. The Kimmels were
not made aware of this. In fact, on January 23, 2007, June
provided her personal history to Western Reserve as part
of the application process, after the 60-day period covered
by the conditional receipt for decision-making had already
expired.
When Richard was killed on February 26, 2007, the only
affirmative actions Western Reserve seems to have taken
on his application were to request blood work and vital
signs (which were provided and which did not reveal any
physical conditions relevant to Richard’s application), to
request Richard’s driving history and June’s personal
history, and to request Dr. Nasr’s records. Western Reserve
then inexplicably closed Richard’s application without
receiving the records from Dr. Nasr. It did not notify
Richard that his application had been rejected, it simply
did nothing. The appellate record, the briefs, and Western
Reserve’s counsel at argument have offered no explanation
for this lapse.
No. 10-1336 13
Although Western Reserve’s lack of action is inexplica-
ble, unfortunately for June it is not actionable under
existing Indiana law. June has not directed us to, and we
have not found, Indiana decisions recognizing an insurer’s
duty of good faith in its handling of applications with
those who are not yet its policyholders. In the key case first
recognizing an insurer’s duty of good faith, the Indiana
Supreme Court wrote: “The obligation of good faith and
fair dealing with respect to the discharge of the insurer’s
contractual obligation includes the obligation to refrain
from (1) making an unfounded refusal to pay policy
proceeds; (2) causing an unfounded delay in making
payment; (3) deceiving the insured; and (4) exercising any
unfair advantage to pressure an insured into a settlement
of his claim.” Hickman, 622 N.E.2d at 519. The Hickman list
of examples is not exclusive, but we have not detected any
signs that Indiana is likely to extend its reasoning to an
applicant for insurance. In granting Western Reserve’s
motion for summary judgment on this issue, the district
court relied on Metropolitan Life Insurance Co. v. Brady, 174
N.E. 99 (Ind. App. 1930). In considering an appellant’s
claim that an insurance company was liable for negligent
delay in acting upon an application for life insurance, that
court wrote:
this court as presently constituted cannot perceive how
a tort liability can be predicated upon an insurance
company until and unless some legal duty devolved
upon the insurance company to either accept or reject
an application for insurance within a reasonable time.
This legal duty must arise by virtue of some express
provision of the statute or from the contractual relation
existing between the parties whereby a legal duty, not
14 No. 10-1336
a moral duty, devolves upon the insurance company to
act within a reasonable time upon an application
submitted.
Brady, 174 N.E. at 102. Although Brady is dated and came
long before Hickman, it is still good law in Indiana. 2 June
has not pointed to any statutory or contractual basis on
2
June points out that the Brady court, in discussing cases from
other jurisdictions, acknowledged a Colorado case that held:
“When a company has received the first premium, and it is to
apply from the date of application, fair dealing requires that the
company act upon the application within a reasonable time.
Otherwise, it would be permitted to hold the applicant’s money,
with no return, for such time as it saw fit; a condition which
cannot be supposed to have been intended by the parties.”
Brady, 174 N.E. at 101, quoting De Ford v. New York Life Insurance
Co., 224 P. 1049, 1051 (Co. 1924). Courts in other states have
imposed a duty under common law on insurers to accept or
deny an insurance application within a reasonable time, relying
on a wide variety of tort theories to protect applicants from
the unfairness that can result when an insurer holds a premium
for a long time. See 16 Williston on Contracts §§ 49:43 and 49:44
(4th ed.). Brady declined to find such a duty under Indiana law,
however, and no Indiana court has indicated a different view.
As is evident from the discussion in Williston, the breach-of-
contract analysis used in Kaiser and Hakey serves to protect
Indiana applicants from the same risk of unfairness that other
courts have addressed through the variety of tort theories.
Although Kaiser and Hakey did not protect Richard here, the time
limit on Western Reserve’s conditional receipt provided a
comparable limit to protect him and his family for a time, but
the time was not open-ended.
No. 10-1336 15
which Indiana law would impose a duty on Western
Reserve to accept or reject Richard’s application within a
reasonable time. The relationship between an insured and
an insurer is different enough from the relationship
between an applicant and a prospective insurer that we
cannot predict with any confidence that the Indiana
Supreme Court would extend Hickman to the latter.
Although Western Reserve deserves criticism for its
handling of Richard’s application for life insurance, its
behavior is not actionable under Indiana tort law. On this
issue, too, we affirm the district court.
A FFIRMED.
11-23-10