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Berg v. New York Life Insurance Co.

United States Court of Appeals, Seventh Circuit

July 27, 2016

Eric Berg, Plaintiff-Appellant,
New York Life Insurance Company and Unum Life Insurance Company of America, Defendants-Appellees.

          Argued November 6, 2015

         Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 11 C 7939 - Milton I. Shadur, Judge.

          Before Wood, Chief Judge, and Posner and Easterbrook, Circuit Judges.

          Wood, Chief Judge.

         Eric Berg brought this breach of contract action when New York Life, through its administrator Unum, refused to pay him disability benefits. At bottom, this case turns on the meaning of one phrase: "requires and receives regular care by a Physician." Does the clause contain a temporal element? The insurers say yes, and the district court agreed, granting them summary judgment. But it certainly says nothing about timing on its face, and we can find no other sign that such a requirement was meant to be engrafted onto the phrase. Applying the basic principle that the language must be construed against the insurers, we reverse the judgment of the district court.


         Born in 1959, Eric Berg was a long-time pit broker at the Chicago Mercantile Exchange. In 1991 and 1994, Berg bought two disability-income insurance policies underwritten by New Yo r k Life. In 2005, he started to experience a tremor in his arms and hands. The tremor interfered with his ability to write quickly and legibly, and in September 2007, the tremor forced him to leave his job. In February 2010, a neurologist diagnosed Berg with an "essential tremor, " and Berg applied for total disability benefits.

         Although New York Life and Unum approved Berg's claim on July 2, 2010, they designated his disability onset date as February 3, 2010, rather than September 2007. Then, in April 2012, Unum discontinued Berg's total-disability benefits. It asserted that he was eligible only for residual-disability benefits because when he applied, his regular occupation was that of an "unemployed person." Berg sued, seeking benefits dating from September 2007 and a designation of "total disability" for the purpose of future benefits. The district court granted summary judgment to the defendants. Berg appealed.


         We review the district court's decision to grant summary judgment de novo, construing the facts in the light most favor- able to the non-moving party-here, Berg. See Jaburek v. Foxx, 813 F.3d 626, 630 (7th Cir. 2016). Summary judgment is appropriate only when there is no dispute of material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P . 56(a).


         Before turning to the merits, we address the insurers' notice defenses, which are dispositive if well taken. Berg does not contest that his Notice of Claim and Proof of Loss submissions were untimely. Country Mut. Ins. Co. v. Livorsi Marine, Inc., 856 N.E.2d 338, 343 (Ill. 2006). He asserts, however, that the insurers waived these defenses.

         In their answer to Berg's first amended complaint, the insurers raised the argument that Berg failed to comply with the policies' Notice of Claim or Proof of Disability or Loss provisions. They reiterated this point in their response to Berg's oddly styled "motion to narrow the issues" under Federal Rule of Civil Procedure 16. This is not a use of Rule 16 that we recognize. Rule 16, entitled "Pretrial Conferences; Scheduling; Management, " guides (not surprisingly) case management-it is not a tool for resolving dispositive motions, whether under Rule 12(b) or Rule 56. Perhaps that is why the district court's rulings were silent on the insurers' notice defenses. No matter: at that point, the insurers appear to have abandoned this tack. In their summary judgment motion, the insurers expressly relied upon the district court's reasoning in its previous opinions, but they did not bring up notice. We agree with Berg, therefore, that the notice defenses are waived. See D.S. v. E. Porter Cnty. Sch. Corp., 799 F.3d 793, 800 (7th Cir. 2015) (arguments not raised in motion for summary judgment are waived).


         On to the main event: interpreting the insurance policies. The parties agree that Illinois law governs here. Our primary goal in interpreting an insurance policy "is to give effect to the intent of the parties as expressed in the agreement." DeSaga v. W. Bend Mut. Ins. Co., 910 N.E.2d 159, 163 (Ill.App.Ct. 2009). Where "the terms of an insurance policy are clear and unambiguous, they must be given their plain and ordinary meaning and enforced as written, unless to do so would violate public policy." Id. If a word is specifically defined in the policy, that meaning controls. Am. Nat. Fire Ins. Co. v. Nat'l Union Fire Ins. Co. of Pittsburgh, PA , 796 N.E.2d 1133, 1141 (Ill.App.Ct. 2003). On the other hand, if the policy language is "susceptible to ...

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