No Duty Owed In Wrongful-Death Case
September 2008
The 1st District Appellate Court recently held that an agent for an insurance company owes no tort duty to a prospective insured in connection with the issuance of a life insurance policy, so long as no agency relationship with the prospective insured has been established and so long as the agent has not induced detrimental reliance by the prospective insured. Bovan v. American Family Life Ins. Co., 2008 WL 3837848 (1st Dist. Aug. 15, 2008).
The plaintiff, the administrator for the estate of Lorenzo Hamilton, who was allegedly murdered pursuant to a plot to obtain the proceeds of a life insurance policy, was represented by Christopher D. Freeman of the Law Offices of Steven J. Seidman. Joshua G. Vincent and Carol Proctor of Hinshaw & Culbertson represented Eric Lindsay, an insurance agent for American Family Life Insurance Company.
According to the complaint, three individuals plotted to obtain the issuance of a life insurance policy in Hamilton's name, and then murder Hamilton, so that they could collect the death benefit. To this end, two of them went to the insurance office of Lindsay, an American Family agent, in 2001, with one of them impersonating Hamilton. They filled out an insurance application which allegedly contained blatantly false information about Hamilton. Notwithstanding the obviously false information contained in the application, American Family issued the policy.
The complaint further alleged that, pursuant to the plot, Hamilton was murdered a couple of days later and that, but for the issuance of the life insurance policy on his life, Hamilton would not have been murdered. The plaintiff sought recovery against both American Family and Lindsay for wrongful death, claiming that the defendants failed to properly investigate the material facts before issuing the policy. This misconduct, according to the complaint, proximately caused Hamilton's death.
Lindsay filed a motion for summary judgment arguing that he had no duty to Hamilton, whom he apparently had never met, but that even if he did have a duty, he could not have foreseen Hamilton's death. In response to the motion, the plaintiff, among other things, offered an expert witness affidavit.
In the affidavit the expert asserted familiarity with the standard of care for insurance producers and regarding the application and approval process for life insurance policies. The expert further stated that he had reviewed American Family's rules and guidelines, that Lindsay had ignored may red flags and suspicious conduct, and that, in the expert's view, Hamilton would not have been killed if Lindsay had handled the situation with due care.
Lindsay moved to strike the affidavit, which the trial court allowed, on the ground that the expert lacked proper knowledge to form an expert opinion on whether Lindsay had taken adequate care in processing the policy. The court then granted Lindsay's summary judgment motion, finding no breach of duty. The plaintiff filed this appeal.
In an opinion by Justice Joseph Gordon, the 1st District affirmed. He began by noting that, under the Wrongful Death Act, 740 ILCS 180/0.01 et seq., a plaintiff must show that the defendant owed a duty to the deceased, the defendant breached the duty, the breach was the proximate cause of the deceased's death, and monetary damages resulted. Lindsay's motion in the trial court focused on the first and third elements, namely, duty and proximate cause. Gordon focused on the issued of duty.
To establish a duty, the plaintiff relied on Bajwa v. Metropolitan Life Ins. Co., 208 Ill.2d 414, 804 N.E.2d 519 (2004), where the Illinois Supreme Court observed that an insurance company owes a duty of care to properly advise a proposed insured of a life insurance policy to be taken out on his life. Gordon found Bajwa not applicable here because, while it spoke to the question of whether American Family owed a duty of care to Hamilton, it did not speak to the question of whether Lindsay, as an agent of the insurer, owed Hamilton a duty of care, because agent liability was not at issue in that case.
Although finding no case addressing to the exact situation at hand, Gordon said that the general rule in Illinois is that an insurance agent working for the insurer has no duty of care toward a customer, as long as there is no agency relationship between the agent and the customer. The same would not be true for one serving as agent of the insured, but since the duty of reasonable care flows from the parties' relationship, where there is no such relationship, no duty typically arises.
Gordon was careful to point out that the absence of an agency relationship with the proposed insured does not mean that an insurance agent can never be liable to a proposed insured. He cited Talbot v. Country Life Ins. Co., 8 Ill.App.3d 1062, 291 N.E.2d 830 (3d Dist. 1973), as an example of where an insurer's agent induced detrimental reliance by a proposed insured, by failing to process an application within a reasonable time.
The Talbot approach, however, according to Gordon, would have no application where the agent and purported insured have no dealings that could give rise to an affirmative undertaking. The general rule would thus apply in the case here where Lindsay had no contact or course of dealing with the deceased. Here, moreover, American Family was the party that decided whether to issue the policy that allegedly led to Hamilton's death, not Lindsay, so it was reasonable to place the burden of care on American Family rather than Lindsay.
The plaintiff nevertheless argued that Lindsay played an active role in violating a duty that American Family owed Hamilton, and therefore should be liable. Gordon again disagreed noting that an agent's breach of duty to the principal is not an independent basis for the agent's tort liability to a third party. The agent is subject to tort liability to a third party only when the agent's conduct breaches a duty that the agent owes the third party, which was not the case here.
In support of his argument concerning Linsday's active role, the plaintiff relied in part on Grover v. Commonwealth Plaza Condominium Ass'n, 76 Ill.App.3d 500, 394 N.E.2d 1273 (1st Dist. 1979), where the court held that an agent could incur liability by actively participating in a breach of contract. Gordon distinguished that case, however, on the ground that it involved liability in contract, not tort. He further observed that Grover had been repudiated by subsequent case law.
In sum, Gordon said that the plaintiff had failed to establish the element of duty necessary for a wrongful death lawsuit, and that the trial court's grant of summary judgment would therefore be affirmed. This conclusion made it unnecessary for the court to address the other elements of a wrongful death cause of action.
That conclusion also made it unnecessary for the court to address whether the striking the affidavit of the plaintiff's expert was error. The affidavit, according to Gordon, which stated that Lindsay had improperly ignored suspicious conduct, would be relevant in determining whether Lindsay would have breached his duty to Hamilton if in fact Lindsay had such a duty. The affidavit, however, was not relevant in determining if Lindsay had a duty in the first place.
The judgment of the trial court therefore was affirmed.
