Wagner v. Certain Underwriters at Lloyd London
Key Takeaways
- 1 Automatic benefit increase endorsement silence on calculation method is a missing term, not an ambiguity.
- 2 Surplus line insurance exemption from Insurance Code prejudgment interest is forfeited if raised post-trial.
- 3 Relevant for insurance coverage attorneys litigating disability policy benefit calculations and prejudgment interest disputes.
Summary
Jeffrey Wagner, the named insured under a long-term disability policy issued by Certain Underwriters at Lloyd's London, filed a declaratory judgment action seeking an increased Principal Sum Amount under an Automatic Benefit Increase Endorsement. After a bench trial on documentary evidence, the trial court entered judgment for Wagner, awarding $1,749,200 in additional Principal Sum Amount plus $474,871.86 in prejudgment interest at 9% per annum under sections 357.9 and 357.9a of the Illinois Insurance Code, for a total judgment exceeding $2.2 million. Underwriters appealed.
The appellate court affirmed that the conditions of the endorsement were satisfied, finding that uncontradicted evidence — including an email and deposition testimony from Ann Brennan — established that Wagner's earned income increased from $1,330,276 to $1,350,000 in 2016 and that Underwriters received and agreed to that documentation before Wagner went on claim. However, the court reversed the damages calculation, holding that the endorsement's silence on how to compute the increased Principal Sum Amount constituted a missing contractual term rather than an ambiguity. Applying the agreed-upon formula to the $19,724 income increase yielded the only reasonable result: an additional $166,608. The court also affirmed the prejudgment interest award, finding that Underwriters forfeited its surplus line exemption argument by raising it for the first time in a post-trial objection to the proposed final order.
For practicing attorneys, this decision clarifies that silence in an insurance endorsement on a calculation method will be treated as a missing term to be supplied by logical deduction from agreed terms — not as an ambiguity triggering the contra proferentem rule. It also underscores that exemption arguments under the Insurance Code must be raised during trial proceedings or they are forfeited.
Key Holdings
1. An insurance endorsement's silence on how to calculate a benefit increase is a missing contractual term, not an ambiguity; courts supply a reasonable term by logical deduction from agreed terms rather than construing against the drafter. 2. The conditions of an Automatic Benefit Increase Endorsement — including documented income increase and insurer receipt and agreement — may be established by uncontradicted email and deposition testimony even without formal approval letters or premium adjustments, where the endorsement provides that increases are automatic. 3. An insurer forfeits a surplus line insurance exemption from the Illinois Insurance Code's prejudgment interest provisions (215 ILCS 5/357.9 and 357.9a) by failing to raise the argument until after trial and after submission of a proposed final judgment order. 4. Applying de novo review to a bench trial conducted entirely on documentary evidence, an appellate court stands in no inferior position to the trial court in assessing the weight and credibility of that evidence.