## Facts

- On September 22, 1967, Life of America Insurance Company issued a $5,000 life insurance policy covering Katherine Eckenrode’s husband for death from “accidental causes,” payable immediately upon due proof of death.
- On December 17, 1967, the insured died as the accidental victim of a homicide.
- Eckenrode alleged she satisfied the policy’s requirements and repeatedly demanded payment, but the insurer refused to pay despite having no valid basis to doubt the claim.
- Eckenrode alleged her husband left her with several children and no property of value; she had no money, including for funeral expenses, and was forced to borrow funds and rely on relatives for support.
- In January 1968, the insurer sent Eckenrode a letter implying payment depended on completion of a police investigation and urging her to settle immediately for less than the policy’s value.
- Eckenrode filed a three-count diversity complaint: Count I for the $5,000 policy proceeds; Count II for compensatory damages for severe emotional injury caused by the insurer’s “outrageous” refusal to pay despite knowing her distress; and Count III seeking compensatory and punitive damages based on alleged fraud in the insurer’s promise of prompt payment and the insurer’s attempt to coerce a discounted settlement.
- The district court dismissed Counts II and III for failure to state a claim and dismissed Count I without prejudice. Afterward, Eckenrode pursued Count I in Illinois state court and settled that claim, leaving only Counts II and III at issue on appeal.

## Issues

1. Whether, under Illinois law, allegations that an insurer deliberately refused to pay clearly due policy proceeds to a financially desperate beneficiary and attempted to force a reduced settlement state a claim for intentional infliction of emotional distress.
2. Whether the fraud and coercion allegations in Count III, including a request for punitive damages, were sufficient to survive a motion to dismiss.

## Decision

- The Seventh Circuit reversed the district court’s dismissal of Counts II and III and remanded.
- Accepting the pleaded facts as true, the court held the allegations could support a finding of extreme and outrageous conduct under Illinois law, given the insurer’s asserted lack of any valid defense, its knowledge of Eckenrode’s severe distress, and its alleged effort to obtain a discounted settlement by withholding payment.
- The court held dismissal at the pleading stage was improper because the complaint alleged facts from which a trier of fact could find intentional infliction of emotional distress.
- The court also held Count III’s allegations (including fraud-related assertions and coercive settlement pressure) were sufficient to proceed; the court did not treat punitive damages as categorically unavailable on the pleadings.

## Legal Principles

- On a Rule 12(b)(6) motion, the court assumes well-pleaded factual allegations are true and asks only whether the plaintiff has stated a claim on which relief may be granted.
- Illinois recognizes liability for intentional infliction of emotional distress when conduct is extreme and outrageous, the defendant intends severe distress (or knows there is a high probability of it), the distress occurs, and the conduct causes it.
- Whether conduct is “extreme and outrageous” depends heavily on context, including the plaintiff’s known susceptibility and the defendant’s awareness of the plaintiff’s condition.
- Allegations that an insurer withheld clearly owed benefits without justification, while knowing a beneficiary faced acute hardship, and sought to induce acceptance of less than the policy amount can be enough—at the pleading stage—to support an inference of outrageous conduct.
- Allegations of fraud and willful misconduct related to claims handling and settlement pressure may support tort recovery beyond contract damages, including a claim for punitive damages where state law allows such awards for egregious misconduct.

## Conclusion

The Seventh Circuit held that Eckenrode’s allegations—nonpayment of clearly due accidental-death proceeds, knowledge of her severe financial hardship, and pressure to accept a reduced settlement—were sufficient under Illinois law to state tort claims (including intentional infliction of emotional distress) and could not be dismissed on the pleadings; the court reversed and remanded for further proceedings on Counts II and III.


Eckenrode v. Life of America Insurance Company, 470 F.2d 1 (1972)