In Dahleh v. Minnesota Life Ins. Co., No. 25-1315, 2026 U.S. App. LEXIS 1378 (7th Cir. Jan. 20, 2026), the Seventh Circuit affirmed the District Court’s award of summary judgment to Minnesota Life on plaintiff’s claim that the insurer improperly canceled a universal life insurance policy in violation of Illinois’ premium notice statute, 215 Ill. Comp. Stat. 5/234. Section 234(1) provides the requirements for insurers’ premium notices to policyholders and imposes a six-month grace period if insurers fail to satisfy these requirements. Importantly for Dahleh however, Section 234(2) states the requirements do not apply “to any policies upon which premiums are payable monthly or at shorter intervals.” The rub in Dahleh: how to interpret the statute in the context of universal life insurance policies where the amount and timing of premiums are determined by the policyholder.
No worries says the Seventh Circuit: for universal life insurance policies, the required monthly policy charges necessary to keep the policy in force are “premiums” under the statute. Noting that the Illinois Legislature had not provided any indication that “premium” as used in this statute should carry anything other than its ordinary meaning, the Court reasoned that a premium is a payment “required to maintain an insurance policy[…] when making that payment is sufficient to maintain the policy for some period without requiring some additional payment[.]” Id. at *9-10. Therefore, “regardless of how [the insurer] phrased its policy,” the required monthly charges were “in substance premiums” for purposes of Section 234. And, since these required monthly charges were charged each month on the policy’s anniversary date, the policy fell within the statute’s exception for policies where “premiums are payable monthly or at shorter intervals.” In essence, the Seventh Circuit rejected an overly formalistic view of premiums in the context of universal life insurance policies and instead looked to the substance of these products which, just like more common term life insurance policies, have monthly charges required to keep the policy in force.
Two other items of note underlying the Seventh Circuit’s decision. First, the opinion begins by highlighting it “presents a variation on the long-controversial practice of investing in life insurance policies on the lives of others” and then details the owner’s established practice of allowing the policy to enter grace periods, waiting until the end of the grace period to make additional payments, and then only paying the minimum amount required to keep the policy in force. The Court seemingly had no particular sympathy for the owner’s “high-risk choice to keep insufficient funds in the account to cover the required charges on their due dates and to use every last day of each grace-period.” Id. at *13. Second, the opinion stresses that applying Section 234 to universal life policies would place insurers in the “nonsense” position of being statutorily required to send out premium notices 15 days before the start of the grace period when insurers would not know whether a grace period would be triggered until the day it attempted to withdraw the monthly charges. “The Section 234(2) exception works to prevent such a confusing conundrum[.]”
If you have any questions, please contact the authors, Louis F. Mendez and David P. Donahue.