In the
United States Court of Appeals
For the Seventh Circuit

No. 00-1363

ANDREW J. HOTALING, M.D.,

Plaintiff-Appellant,

v.

CHUBB SOVEREIGN LIFE INSURANCE CO.
and JEFFERSON PILOT FINANCIAL LIFE
INSURANCE CO.,

Defendants-Appellees.



Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 99 C 23--Harry D. Leinenweber, Judge.


Argued September 20, 2000--Decided February 21, 2001




  Before COFFEY, EASTERBROOK, and EVANS, Circuit
Judges.

  COFFEY, Circuit Judge. After the death of his
wife (Sylvia Morris), Andrew J. Hotaling, M.D.,
sued Chubb Sovereign Life Insurance Company and
Jefferson Pilot Financial Life Insurance Company
(collectively "Chubb") for $1 million alleging
that a life insurance policy issued by Chubb (and
covering his deceased wife) was in effect at the
time of her death. The primary issue both at
trial and on appeal is whether Chubb complied
with 215 Ill. Comp Stat. 5/234, which requires
all life insurance companies licensed to operate
within Illinois to send premium-due notices to
their policyholders before allowing a life
insurance policy to lapse./1 After a bench
trial, the district court found that Chubb had
complied with the Illinois statute and entered
judgment in favor of Chubb. We affirm.


I.  BACKGROUND
  On May 8, 1995, Sylvia Morris purchased a
universal life insurance policy from Chubb which
provided life insurance coverage of $1 million.
The policy required an annual premium of
$2,570.04 to be paid on or before the eighth day
of May each year. Additionally, the policy
specifically provided that "[i]f the premium is
not paid within the [61-day] Grace Period, this
policy will lapse or terminate without value."
When Morris purchased the policy in 1995, she
paid the first year’s premium in advance. It is
undisputed that during the following year (1996),
Chubb sent a premium-due notice to Sylvia Morris
and the premium was timely paid by her husband,
Andrew Hotaling. This dispute arises because
Hotaling claims that Chubb failed to send a
premium-due notice to his wife the third year;
that is, in 1997.


  A.   The Policy Lapses

  It should be noted at the outset that at the
bench trial Chubb was unable to produce a copy of
the premium-due notice it allegedly sent to
Sylvia Morris prior to lapsing her policy nor did
the carrier introduce the testimony of an
employee who specifically recalled sending Morris
a notice./2 Despite the absence of a copy of the
actual premium-due notice sent to Morris, Chubb
maintains that it sent such a notice to Morris on
April 22, 1997, in the normal course of its
business. Hotaling testified at trial that he did
not receive such a notice and that he would have
been aware if Morris had received such a notice
because he was in charge of paying their family
bills.

  Chubb additionally asserts that in June 1997 it
sent a "lapse pending letter" to Morris alerting
her to the fact that her life insurance policy
would lapse if a premium payment was not received
within the policy’s grace period. Chubb
introduced a copy of this letter at trial, which
reads in relevant part:

Dear Ms. Morris,

Currently your policy does not have enough value
to cover the monthly expenses due on May 08,
1997. We are concerned that your policy will
lapse without value on July 08, 1997 unless you
take immediate action.

The minimum payment is $854.72. Please understand
that if this policy lapses, you are losing the
financial security and protection this insurance
coverage provides you.

* * * *

Please don’t let this policy lapse, contact your
Chubb Sovereign Life representative listed below
or a customer service representative today.

Hotaling denies that either he or his wife ever
received a letter of this nature from Chubb.

  According to Hotaling’s trial testimony, neither
he nor his wife was aware that anything was amiss
regarding her life insurance coverage until
receiving a "lapse letter" from Chubb dated July
9, 1997, which stated that her policy had lapsed
due to non-payment of premiums. The lapse letter
stated:

We regret to inform you that your policy coverage
with Chubb Sovereign Life Insurance Company is no
longer in force because we did not receive your
past due premium as prescribed by your policy. We
are sorry that you have made this decision to
leave our company.

* * * *

Please give careful consideration to reinstating
this valuable policy protection. You may have the
option of continuing this coverage by completing
reinstatement requirements and paying the past
due premium of $854.72. Your Chubb Sovereign Life
representative listed below or a customer service
representative would be available to answer your
questions and guide you through this process.

  On July 31, 1997, three weeks after receiving
the lapse letter, Morris phoned Chubb and
requested reinstatement forms pursuant to the
information contained in the final lapse letter
of July 9, 1997. Chubb forwarded Morris the
necessary paperwork the following day, August 1,
1997. The reinstatement letter and application
forms Chubb mailed to Morris stated that, for
purposes of underwriting, Morris would be
required to undergo and pass a medical
examination prior to the reinstatement of her
policy. Morris scheduled the required medical
exam for August 24, 1997. Tragically, before the
medical examination date arrived, Morris was
diagnosed with terminal brain cancer, rendering
her uninsurable. Morris died less than five weeks
later.

B.   Procedural History

  Following Morris’s death, Hotaling requested
that Chubb disburse the benefits he was entitled
to receive under the terms of Morris’s policy.
Chubb refused Hotaling’s request for payment,
maintaining that Morris’s policy had lapsed prior
to her death due to her failure to pay her
premium before the expiration of the policy’s
grace period on July 8, 1997. Hotaling countered
that Chubb could not validly lapse the policy
because Morris had never received a premium-due
notice alerting her that the policy was about to
lapse as required by the Illinois Insurance Code.
Thereafter, Hotaling filed a complaint in the
Circuit Court of Cook County, Illinois, on
December 14, 1998, alleging that Chubb had
violated 215 Ill. Comp. Stat. 5/234.

  After Chubb removed the case to federal court,
a bench trial was held on December 15, 1999. At
trial, Hotaling testified that he had never
received a premium-due notice from Chubb or the
lapse-pending letter, and argued that the failure
to send a premium-due notice pursuant to Illinois
law prevented Chubb from legally lapsing Morris’s
policy.

  Chubb, on the other hand, claimed it had
complied with the statute by mailing a premium-
due notice to Morris, but admitted that it could
not produce any witnesses who could testify that
they recalled placing Morris’s specific premium-
due notice in the mail. Chubb, however, did
introduce testimony and evidence explaining its
usual procedures that insure that premium-due
notices are mailed to all customers, such as
Morris, who have failed to pay their premiums due
in a timely fashion. Chubb called Ronald Reed, an
assistant vice-president of information
technology at Chubb, who testified that Chubb
utilized a computer system which "automatically
handles the billing of the premium [as in] the
case of the policy of Sylvia Morris." After
hearing Reed’s testimony and related paperwork
documenting Chubb’s business practices used to
notify its customers of delinquent premium
payments, the trial judge made the following
findings of fact based on Reed’s testimony:

4. The fact issue in the case was whether the
statutorily required notice (215 ILCS 5/234) was
mailed by Chubb to Morris. Chubb has an almost
fully automated system of mailing premium notices
and other correspondence to the holders of its
Universal Life Policies. It is set up to bill 19
days in advance. In order to generate these
premium notices and other correspondence, Chubb
has contracted with Management Applied
Programming ("MAP"), a firm located in Santa
Barbara, California. The process starts when the
Chubb computer in Concord, New Hampshire, which
is programmed to generate a list of all policies
that premium notices are to be sent (sic) that
date. The Chubb computer is connected by leased
line with the MAP computer and the list, or
abstract, is transferred electronically to
California. In turn the MAP computer is
programmed to print the name of the insured, the
policy number, the premium amount due, and the
due date, on pre-printed forms. The premium due
notices are checked for quality control, i.e., to
insure readability, then checked to make sure
that the number of notices "is in close agreement
with the number that should be there." They do
not do an actual count because they do
approximately 1,000 notices a day. The notices
then go to the mail room where a machine
automatically folds the notices, [and] stuffs
them [into] window envelopes. The notices are
then postage metered and taken to a mail drop
where they are picked up by the post office.

5. Two extracts are generated, one by Chubb,
which is the list that is transferred to MAP. MAP
in turn generates a list of all notices printed
by it. The MAP list can only be generated if the
initial transmission from Chubb has been
successful. The MAP computer is programmed to
refuse to print the notices if the system
inadvertently fails to print one or more of the
notices. Neither MAP nor Chubb, however, keep a
duplicate of the actual premium notices sent.
Chubb however does keep a copy of all other
correspondence to the policy holder, such as
lapse warnings and lapse notices.

6. According to Chubb’s records the premium
notice process for Morris’ policy commenced in
Concord, New Hampshire, at 1:08 a.m. EST on April
22, 1997, and was received at MAP in California,
at 10:16 p.m. PST, April 21, 1997, 8 minutes
later. The notice was printed and programmed to
contain the name of the insured, the insured’s
mailing address, the policy number, the premium
due date, and a statement that if payments were
not made that the policy would lapse and all
payments would be forfeited and the policy would
be void.


  1.   Chubb’s Exhibit #27

  Chubb also called Wendalyn Chase, another
assistant vice-president at Chubb, to testify
regarding the procedures used to contact
policyholders regarding premium payments. In the
course of her testimony, Chubb introduced (over
plaintiff’s objection)/3 an exhibit consisting
of eight pages of policy and premium information
dealing with the policyholders whose names appear
on the April 22, 1997 billing extract list both
before and after Sylvia Morris’s name. This
exhibit, marked as Defendant’s exhibit #27,
reveals that the individuals listed directly
before and after Morris on the April 22, 1997
billing extract list made premium payments to
Chubb on May 9, 1997 and May 5, 1997,
respectively.

  At the conclusion of receiving evidence, the
trial judge asked the parties to submit written
final arguments. He specifically stated:
The question here, the one question I have is--
there are three alternatives here that could have
happened. One is they (Hotaling and Morris) got
the notice and either lost it or disregarded it
or whatever. Another one is that no notice was
ever sent out. The third one is that it was sent
out and never got there. What’s (sic) the
ramifications of that? You might comment on that
in your arguments.

After receiving the parties’ written arguments
and weighing the evidence at trial, the district
court entered judgment for Chubb stating:

The question therefore is whether the record
contains sufficient evidence to show by a
preponderance of the evidence that Chubb actually
mailed the premium notice to Morris. Both Chubb
and MAP employ electronic means in order to send
out premium notices. In this day and age this is
not unexpected . . . . Direct evidence of mailing
or testimony of the mail clerk is not necessary,
given the routine nature of [the] mailing of such
notices provided there is some corroboration.
Kolias v. State Farm Mutual Automobile Ins. Co.,
102 Ill. Dec. 609, 612 (1st Dist. 1986). The
issue is therefore whether there is sufficient
corroborating evidence to sustain Chubb’s burden
of proof on the issue. The corroborating evidence
that Chubb submitted consisted of evidence that
the policy holder directly before Morris and the
policy holder directly after her on the extract
generated by Chubb and sent to MAP apparently
received their notices of premium due because the
premium payments were received by Chubb on May 9,
1997, and May 5, 1997, respectively. This
evidence coupled with the evidence that the
computer program was designed to print all or
none of the premium notices gives the court a
basis to believe that it is more probably true
than not true that the premium notices were
printed and placed in the U.S. mail by MAP as
testified to by Wayne Hayes of MAP. Thus,
assuming that neither Morris nor Hotaling
received the premium notice, it is more probably
true that it was . . . misdirected or lost by the
post office.

The judge then went on and concluded that Chubb
complied with 215 ILCS 5/234 and that the policy
had lapsed for non-payment of the premium.

II. ANALYSIS
A. Receipt of Defendant’s Exhibit #27

  On appeal, Hotaling argues that the trial court
abused its discretion in allowing Chubb to
introduce in evidence defendant’s exhibit #27,
which consists of eight pages of policy and
premium information regarding a list of those
policyholders whose premium-due notices were
printed at the same time Morris’s notice was
printed. As discussed earlier, Chubb did not
disclose its intent to use these documents until
one week before trial, which was after the
court’s discovery deadline contained in its final
pretrial order. Accordingly, Hotaling had only
five working days to review the potential impact
of the policyholder payment information contained
in the exhibit. Hotaling, therefore, argues that
Chubb’s late disclosure of exhibit #27 unfairly
prejudiced him because he had "no opportunity to
explore the nature of the documents or their
significance."


  1.   Standard of Review

  We have consistently held that decisions to
receive or bar the admission of evidence at trial
as well as the decision to modify a final
pretrial order are matters that rest within the
sound discretion of the trial court. Sandowski v.
Bombardier Limited, 539 F.2d 615, 620-21 (7th
Cir. 1976). In Sandowski, we explained:

Trial judges must be permitted wide latitude in
guiding cases through preparatory stages, and
their decisions as to the extent that pretrial
activity should prevent introduction of otherwise
competent and relevant testimony at trial must
not be disturbed unless it is demonstrated that
they have clearly abused the broad discretion
vested in them . . . . The determination as to
whether or not parties should be held to pretrial
orders is a matter for the discretion of district
court judges.

Id. (internal citations omitted). Thus, we review
the district court’s decision to accept
Defendant’s exhibit #27 under the abuse of
discretion standard. Gorlikowski v. Tolbert, 52
F.3d 1439 (7th Cir. 1995). "[A]n abuse of
discretion occurs when no reasonable person could
take the view adopted by the trial court. If
reasonable persons could differ, no abuse of
discretion can be found." Id. at 1444 (quoting
Durr v. Intercounty Title Co. of Illinois, 14
F.3d 1183, 1187 (7th Cir. 1994)).

  As this court has explained, we afford great
deference to a judge’s evidentiary rulings

because of the trial judge’s first-hand exposure
to the witnesses and the evidence as a whole, and
because of the judge’s familiarity with the case
and ability to gauge the impact of the evidence
in the context of the entire proceeding. Indeed,
[a]ppellants who challenge evidentiary rulings of
the district court are like rich men who wish to
enter the Kingdom: their prospects compare with
those of camels who wish to pass through the eye
of the needle. Because we give special deference
to the rulings of the trial judge[, a defendant]
obviously carries a heavy burden.

United States v. Walton, 217 F.3d 443, 449 (7th
Cir. 2000) (internal citations and quotations
omitted) (brackets in original).


  2. Relevance of Defendant’s Exhibit #27
  Defendant’s exhibit #27 reveals that the persons
listed directly before and after Morris on the
April 22, 1997 billing extract list made premium
payments to Chubb on May 9, 1997 and May 5, 1997,
respectively. With the knowledge that those
policyholders whose names appeared directly
before and after Morris on the billing extract
made payments shortly after the notices were
printed, the trial judge could reasonably
conclude that: (1) MAP mailed, and these two
policyholders received, the premium-due notices
that were printed on April 22, 1997; and (2) MAP
mailed Sylvia Morris a premium-due notice because
her notice was processed at the same time that
MAP mailed a premium-due notice to the other
individuals listed before and after her on the
billing extract. Furthermore, the fact that such
payments were made shortly after Chubb processed
and mailed premium-due notices, most certainly,
allows a reasonable factfinder to conclude that
Chubb mailed all of the premium-due notices
processed on April 22, 1997, including the one
addressed to Sylvia Morris. This is especially
true given the fact that MAP’s computer program
was designed to print all or none of the premium-
due notices. Therefore, we are of the opinion
that the district court did not abuse its
discretion in allowing Chubb to introduce
Defendant’s exhibit #27 into evidence./4

B.   The Illinois Premium Notice Statute

  1.   Standard of Review

  The trial judge concluded Chubb had complied
with 215 ILCS 5/234 with the presentation of
evidence that it had mailed a premium-due notice
to Morris in the ordinary course of its business
practices. In reaching this conclusion, the judge
determined that there was no need for Chubb to
offer either a copy of the actual premium-due
notice sent to Morris or the testimony of an
individual who specifically recalled sending a
notice to Morris. Hotaling appeals and claims
that evidence of a company’s customary practices
is insufficient to prove that a premium-due
notice was "addressed and mailed" under 215 ILCS
5/234. As this is a question of statutory
interpretation, we review the trial court’s
interpretation de novo. In re Bonnett, 895 F.2d
1155, 1157 (7th Cir. 1989).


  2. The Statute
  As recited above, the Illinois Insurance Code
requires a life insurance carrier to provide
notice of an overdue premium to a policyholder
before the company can lawfully cancel a policy.
215 ILCS 5/234. However, under Illinois law,
companies are required only to prove that a
legally sufficient notice was "addressed and
mailed," and not that it was received by the
policyholder. Id.; see also Bates v. Merrimack
Mutual Fire Ins., Co., 605 N.E.2d 626 (4th Dist.
1992). It is important to note that under
Illinois law the insurance carrier bears the
burden of proving that the required notice was
"addressed and mailed" to the policyholder.
Cullen v. North American Co., 531 N.E.2d 390 (2d
Dist. 1988).

  Furthermore, the   statute details one manner in
which an insurance   company may meet its burden of
demonstrating that   it "addressed and mailed" a
premium-due notice   to a policyholder, stating:

The affidavit of any officer, clerk or agent of
the (life insurance) company or of anyone
authorized to mail such notice that the notice
required by this section bearing the required
postage has been duly addressed and mailed shall
be presumptive evidence that such notice has been
duly given.

215 ILCS 5/234.

  Hotaling maintains that companies are required
to use the "affidavit method" described above as
the only means of proving they complied with 215
ILCS 5/234. In so arguing, Hotaling relies on
Cullen v. North American Co., 531 N.E.2d 390 (2d
Dist. 1988). However, the plaintiff-appellant
completely disregards the procedural posture of
that case. The Illinois appellate court in Cullen
was reviewing an entry of summary judgment in
favor of an insurance carrier in response to the
company’s pre-trial motion and not (as is the
case here) a judgment entered on the merits after
a trial. The Illinois appellate court in Cullen
was concerned only with the question of whether
the proof of addressing and mailing presented in
the insurance company’s motion and supporting
affidavits was so overwhelming that no issue of
material fact remained for a jury to decide at
trial. When the Illinois appellate court reversed
the district court’s entry of summary judgment in
Cullen, it did not rule (as Hotaling argues)
that, as a matter of law, proof of mailing had to
be achieved with the testimony of a person who
actually addressed and mailed the premium-due
notice. Rather, the Cullen court clearly limited
its decision to the case before it, writing:

The substantive issue to be determined in this
case, thus, is whether the prelapse notice was
properly sent to the insured. Under the statute,
North American had the burden of proving that a
written or printed notice had been prepared for
the insured, that any such notice stated the
amount of premium due and where and to whom it
was to be paid, that the notice had been duly
addressed and properly mailed to Jacqueline
Cullen, and that the notice warned her of the
consequences of failure to pay the premium. Each
of these items presented a question of fact which
had to be resolved before summary judgment could
be properly granted.

  While North American presented exhibits and
affidavits in support of each fact issue, we
conclude that the evidence offered did not
sufficiently resolve those issues to permit
summary judgment.

* * * *

  In our view North American’s evidence, even in
the absence of any contrary evidence from
plaintiff, does not resolve the fact question of
whether or not the insurance company prepared and
sent the premium due notice which is required by
the statute before defendant can avoid payment of
the proceeds of the policy. On the contrary, it
is evident that fair-minded persons could draw
more than one inference from the pleadings,
admissions, affidavits, and exhibits that were
presented to the trial court and, accordingly,
the issues should have been submitted to a trier
of fact for resolution.

Id. at 394. Unlike the plaintiff in Cullen,
Hotaling has had his day in court and the trial
judge, after weighing the evidence submitted,
determined that a timely premium-due notice was
sent to the plaintiff-appellant’s late wife at
her last known address. We are convinced that
Cullen does not limit a factfinder’s ability to
rely on relevant information when determining
whether the required notice was addressed and
mailed. Consequently, the trial court properly
concluded that Chubb complied with 215 ILCS
5/234.
  We are also of the opinion that it makes good
business sense to allow companies to prove that
they complied with mailing requirements in ways
other than with an affidavit from a specific
employee. Rather, in today’s technologically
advanced world such mailings: (1) are routinely
performed by computers; and (2) frequently
contain a large volume of notices mailed at a
single time. If we were to require testimony from
a company’s mailing clerk, insurance companies
would basically be forced to abandon the use of
computers in mass mailings. This would inevitably
increase costs which, as we all know, would be
passed on to the consumer in the form of higher
premiums.

C. Hotaling’s Attack on the Sufficiency of the
Evidence

  Finally, Hotaling attacks the district judge’s
findings of fact as "clearly against the [w]eight
of the evidence." Hotaling did not, however, file
a copy of the trial transcript of the bench trial
from which we might determine if indeed the trial
court’s decision was supported by the weight of
the evidence. In failing to file the trial
transcript, Hotaling has violated Rule 10(b)(2)
of the Federal Rules of Appellate Procedure which
states:

If the appellant intends to urge on appeal that
a finding or conclusion is unsupported by the
evidence or is contrary to the evidence, the
appellant must include in the record a transcript
of all the evidence relevant to that finding or
conclusion.

We confronted this identical situation in
Gramercy Mills, Inc. v. Wolens, 63 F.3d 569, 573-
74 (7th Cir. 1995), where we stated:

Federal Rule of Appellate Procedure 10(b)(2)
requires that a transcript be included in the
record on appeal where a party challenges that
insufficient evidence supports a verdict.
However, [Appellant] did not request that the
trial transcript be included in the record on
appeal. As a result, we are unable to evaluate
the evidence submitted in this case. Such an
omission is grounds for forfeiture of a claim.

Accordingly, Hotaling has forfeited this argument
on appeal and there is no need to consider this
issue any further./5
  The decision of the trial court is

AFFIRMED.



/1 215 Ill. Comp. Stat. 5/234 states:

No life [insurance] company doing business in
this State shall declare any policy forfeited or
lapsed within six months after default in payment
of any premium installment or interest or any
portion thereof, nor shall any such policy be
forfeited or lapsed by reason of nonpayment when
due of any premium, installment or interest, or
any portion thereof, required by the terms of the
policy to be paid, within six months from the
default in payment of such premium, installment
or interest, unless a written or printed notice
stating the amount of such premium, installment,
interest or portion thereof due on such policy,
the place where it shall be paid and the person
to whom the same is payable, shall have been duly
addressed and mailed with the required postage
affixed, to the person whose life is insured, or
the assignee of the policy, (if notice of the
assignment has been given to the company) at his
last known post office address, at least fifteen
days and not more than forty-five days prior to
the day when the same is due and payable, before
the beginning of the period of grace, except that
in any case in which a parent insures the life of
his minor child, the company may send notice of
premium due to the parent. Such notice shall also
state that unless such premium or other sums due
shall be paid to the company or its agents the
policy and all payments thereon will become
forfeited and void, except as to the right to a
surrender value or paid-up policy as provided for
by the policy. The affidavit of any officer,
clerk or agent of the company or of any one
authorized to mail such notice that the notice
required by this section bearing the required
postage has been duly addressed and mailed shall
be presumptive evidence that such notice has been
duly given.

/2 Wendalyn Chase, an assistant vice-president at
Chubb Life in 1997, testified that Chubb Life
does not retain copies of premium-due notices
sent to policyholders because of the bulk and
expense of storing these routine mailings.
According to Chase’s testimony, in 1997 Chubb
Life had approximately 750,000 policyholders
including 250,000 universal life policyholders
such as Morris.

/3 Chubb did not disclose its intent to use the
exhibit in question until one week before trial,
which was after the court’s discovery deadline
contained in its final pretrial order. As a
result of Chubb’s late designation of the
exhibit, Hotaling had only five working days to
review the potential impact of the policyholder
payment information contained in the exhibit.
Hotaling objected that Chubb’s late disclosure of
exhibit #27 unfairly prejudiced his client
because he had "no opportunity to explore the
nature of the documents or their significance."

/4 Hotaling also argues that exhibit #27 should not
have been received into evidence by the trial
judge because it unfairly surprised him and
changed the legal issues being contested at
trial. We hold this argument to be without merit
because the exhibit did not constitute a shift in
tactics or a surprise defense as Hotaling
alleges, but merely corroborated Chubb’s long-
held defense theory--namely, that Chubb mailed
Sylvia Morris a premium overdue notice in the
routine course of its business procedures and
took the initiative to lapse her policy only
after she had failed to timely respond to that
notice with payment.

/5 Although Hotaling failed to include the necessary
transcripts, we obtained a copy of the relevant
materials. After reviewing these materials, we
are of the opinion that the appellant’s arguments
are meritless and, therefore, Hotaling would not
have prevailed on this argument even if he had
complied with FRAP 10(b)(2).
