KIMMEL v. WESTERN RESERVE LIFE ASSURANCE CO. (November 23, 2010)

Richard Kimmell submitted an application for a $500,000 life insurance policy to Western Reserve Life Assurance Co. on November 13, 2006. He submitted a $385 premium with the application. The application provided that Western had 60 days to act on the application and, if it did not act, the application would be deemed declined. Kimmel received a conditional receipt from Western. The conditional receipt stated that the conditional coverage would terminate upon Western’s rejection, acceptance, offer of insurance on different terms, or the expiration of 60 days, whichever came first. The 60 day period expired without any action by Western. Kimmel died several weeks later. Western returned Kimmel’s premium and denied his widow June's claim. June Kimmel brought suit against Western. Magistrate Judge Cherry (N.D. Ind.) granted summary judgment to Western. June Kimmel appeals.

In their opinion, Seventh Circuit Judges Manion, Tinder, and Hamilton affirmed. A dispute centered on a life insurance policy is resolved like any other contract dispute. If the contract language is unambiguous, it controls. Here, the express, plain language of the conditional receipt provides conditional coverage for no more than 60 days, unless the company acts otherwise. Kimmel had no reasonable expectation of any broader coverage and the district court was correct in granting summary judgment on the coverage issue. The Court next addressed Kimmell's bad faith claim. Although Indiana law does impose a duty of good faith between an insurer and its insured, the Court did not believe that an Indiana court would impose such a duty between an insured and an applicant for insurance. The Court found Western's cavalier treatment of the application "inexplicable" and "a poor way to run an insurance company," but it concluded that it was not actionable under state law.