Fayez Dahleh v. Minnesota Life Insurance Company

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 25-1315
F AYEZ DAHLEH ,
Plaintiff-Appellant,
v.
M INNESOTA LIFE I NSURANCE C OMPANY ,
Defendant-Appellee.
____________________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 1:22-cv-06771 — Jeremy C. Daniel, Judge.
____________________
A RGUED S EPTEMBER 9, 2025 — DECIDED J ANUARY 20, 2026
____________________
Before R OVNER , HAMILTON , and S CUDDER , Circuit Judges.
HAMILTON , Circuit Judge. This appeal presents a variation
on the long-controversial practice of investing in life insur-
ance policies on the lives of others. See generally Sun Life As-
surance Co. of Canada v. Wells Fargo Bank, N.A., 44 F.4th 1024,
1031–34 (7th Cir. 2022). Plaintiff Fayez Dahleh bought an ex-
isting policy on the life of one Gilda Perlas, a person with
whom he had no known prior relationship but whose original
purchase of the policy provided the required insurable

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2 No. 25-1315
interest. Holders of otherwise valid policies may sell them to
strangers as investments. See id. at 1031–32 (summarizing Il-
linois case law). Dahleh bought Mrs. Perlas’s policy in July
2019. The policy was called a “flexible premium universal life
insurance policy.” It let the policyholder choose and vary the
amount of insurance in force, and, within limits, the amount
of premiums to be paid. The policy also allowed the policy-
holder to set the schedule for paying premiums.
After Dahleh bought the policy, the policy’s account often
contained insufficient funds to pay the monthly account
charges that defendant Minnesota Life required to be paid to
keep the policy in force. Each new shortage triggered a two-
month grace period. For several years, Dahleh made pay-
ments right before the end of each grace period to keep the
policy in effect at the lowest possible cost. But in February
2022, Dahleh failed to make a payment before a grace period
ended. Minnesota Life canceled the policy.
Dahleh filed this suit alleging that Minnesota Life
improperly canceled the policy without providing the notice
or six-month grace period required under 215 Ill. Comp. Stat.
5/234 before certain types of life insurance policies are
canceled. The district court granted summary judgment in
favor of Minnesota Life. We affirm. The undisputed facts
show that the required premiums for this policy were payable
in monthly intervals, exempting this policy from the notice
and grace-period requirements of 215 Ill. Comp. Stat. 5/234.
I. Factual and Procedural Background
A. Facts for Summary Judgment
On January 10, 2012, Minnesota Life Insurance Company
issued a life insurance policy to Gilda Perlas. Mrs. Perlas

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No. 25-1315 3
initially set the annual planned premium at $60,000. This
policy combined pure insurance protection with investment
features. It was a flexible premium universal life insurance
policy, meaning that the policyholder could vary “the amount
or timing of one or more premium payments or the amount
of insurance.” Ill. Admin. Code tit. 50, § 1411.20. This specific
type of plan also allowed Mrs. Perlas to take out policy loans
against the insurance policy after its one-year anniversary.
The policy’s accumulation value served as collateral for a
policy loan.
For this type of policy, the accumulation value is the sum
of all the various accounts comprising the policy, including
indexed and fixed accounts. Any planned premiums that the
policyholder paid for the policy also contributed to the accu-
mulation value. Minnesota Life used the accumulation value
to cover the policy’s required monthly policy charges. These
policy charges covered the administrative expenses and costs
of coverage needed to keep the policy in force, and they were
due on every monthly policy anniversary.
Given the flexible nature of the policy, a policyholder
could choose to plan not to make any premium payments for
the policy, at least for a time. In that case, Minnesota Life de-
ducted the monthly policy charges from the policy’s accumu-
lation value. If the accumulation value was insufficient to
cover the monthly charges as of the monthly policy anniver-
sary date, Minnesota Life started the clock on a 61-day grace
period. During the grace period, Minnesota Life kept the pol-
icy in effect, allowing the policyholder to remedy the default
by paying a late premium equal to three times the total of the
monthly charges by the end of the grace period. When a grace
period was triggered, Minnesota Life sent a required payment

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4 No. 25-1315
notice to the policyholder indicating the due date and pay-
ment required to keep the policy in force. The required notice
also said that if the total amount due were not received by the
last day of the grace period, “the policy will terminate, except
as to the right to any cash surrender value or nonforfeiture
benefit.”
Mrs. Perlas paid the annual planned premium for the first
two years after the policy was issued. Over the next three
years, Mrs. Perlas made no planned premium payments on
the policy, allowing the policy’s accumulation value to cover
the policy’s required monthly charges. In March 2014, Mrs.
Perlas took out a $73,796.75 policy loan against the policy’s
value, significantly reducing the policy’s accumulation value.
In June 2017, she changed her annual planned premium to
zero, as permitted by the flexible premium feature of the pol-
icy.
Two years later, in July 2019, Mrs. Perlas informed Minne-
sota Life that she was designating plaintiff Fayez Dahleh as
the new owner of the policy. The ownership forms indicated
that Dahleh was Mrs. Perlas’s creditor, but we have no further
details on that topic.
After Dahleh became the policyholder, the accumulation
value often, but not always, fell below the amount required to
pay the policy’s required monthly charges, triggering many
grace periods with required payment notices sent to Dahleh.
From December 2019 to February 2022, there were only three
months when the policy’s accumulation value was sufficient
to pay the monthly charges. When the accumulation value
was insufficient to cover the monthly costs, triggering a grace
period, Dahleh paid online or by telephone just before the

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No. 25-1315 5
grace period ended, sometimes even on the last day of the
grace period.
In December 2021, the flexible policy had in effect a death
benefit of a little more than $700,000. On December 10, 2021,
the monthly policy anniversary, the accumulation value was
again insufficient to cover the monthly charges. As a result,
Dahleh received a required payment notice dated December
10, 2021 indicating the due date, February 9, 2022, and pay-
ment amount, $5,839.78, needed to prevent termination of the
policy. A month later, on January 9, 2022, Minnesota Life sent
a second required payment notice to Dahleh with the same
information.
This time, however, Dahleh did not pay the owed amount
online or by telephone. Instead, Dahleh asserts—and we
accept his version of the facts for purposes of summary
judgment—he mailed a check before the expiration date. But
Minnesota Life never received the payment. As a result,
Minnesota Life terminated the policy on February 9, 2022.
On February 20, 2022, plaintiff’s son called Minnesota Life
to ask how to remedy the default to maintain the policy. The
company told him that the policy had already been termi-
nated and could not be reinstated.
B. 215 Ill. Comp. Stat. 5/234
The Illinois Insurance Code requires insurance companies
to provide certain notice to policyholders before terminating
a life insurance policy for failure to pay premiums. 215 Ill.
Comp. Stat. 5/234. This section applies to policies that will be
terminated “by reason of nonpayment when due of any pre-
mium, installment or interest, or any portion therefore, re-
quired by the terms of the policy to be paid.” 215 Ill. Comp.

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6 No. 25-1315
Stat. 5/234(1). The statute does not define the terms premium,
installment, or interest.
Section 234(1) provides that the insurer must give a poli-
cyholder written or printed notice of the premium amount
due and how to pay no less than 15 days and no more than 45
days before such payment is due. The notice must further in-
clude that failure to pay the amount due will result in termi-
nation of the policy, except as the policy allows for the right
to a surrender value or a paid-up policy. If the insurer fails to
satisfy these notice requirements, Section 234(1) requires the
insurer to provide a six-month grace period for the policy-
holder to cure the default, during which the policy will not
lapse. The statute carves out an exception to the notice and
grace-period requirements, however, for policies “upon
which premiums are payable monthly or at shorter intervals.”
215 ILCS 5/234(2).
C. Procedural History
On December 2, 2022, plaintiff Dahleh filed this case in
federal court seeking a declaratory judgment under Illinois
law that his life insurance policy on Mrs. Perlas remained in
force. The federal courts have jurisdiction based on the par-
ties’ different citizenships and the amount in controversy. 28
U.S.C. § 1332. Plaintiff claimed that Section 234(1) applies to
his insurance policy and that Minnesota Life failed to send
proper notice under the statute, meaning that termination of
the policy violated the statute and was ineffective, leaving the
policy in force.
The parties filed cross-motions for summary judgment.
The district court granted Minnesota Life’s motion for sum-
mary judgment, finding that Section 234(1) applied to the

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No. 25-1315 7
policy at issue, but concluding that Minnesota Life’s letter
providing payment notice satisfied the statute such that no
six-month grace period was required. Plaintiff has appealed.
II. Analysis
We review de novo the district court’s grant of summary
judgment. Life Plans, Inc. v. Security Life of Denver Ins. Co., 800
F.3d 343, 348–49 (7th Cir. 2015). We approach the issue here in
two steps: first, whether the policy’s required charges were
premiums within the meaning of Section 234; and, second, if
so, whether the policy was exempt from the statute’s notice
and grace-period requirements because it fit into the statute’s
exception for policies requiring monthly or shorter-interval
premiums. These questions are governed by Illinois law,
which has not often dealt with the threshold question of what
kinds of payments constitute premiums under this statute.
See Olas v. ReliaStar Life Ins. Co., 712 F. Supp. 3d 1086, 1091
(N.D. Ill. 2024) (noting that “[t]he scant case law on [what con-
stitutes a monthly premium under Section 234] isn’t particu-
larly helpful”). We do not agree with the district court that
Section 234’s notice requirements apply to the policy here. In-
stead, we conclude that the policy’s required charges function
as premiums under the statute, but that they fall into the
monthly-or-shorter exception to the notice and grace-period
requirements. See 215 Ill. Comp. Stat. 5/234(2). Accordingly,
Minnesota Life was not required to satisfy the statutory notice
and grace-period requirements, so we affirm the judgment for
Minnesota Life.
A. Section 234 Premium
We begin by determining whether the required charges
under Dahleh’s Minnesota Life policy were premiums within

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8 No. 25-1315
the meaning of Section 234. As a federal court sitting in diver-
sity jurisdiction, we are guided by Illinois law in interpreting
this statute. Sun Life Assurance Co. of Canada, 44 F.4th at 1031.
The Illinois legislature has not indicated that the definition
of a premium under this statute should differ from the ordi-
nary meaning of an insurance premium. “[W]hen a payment
is required to maintain an insurance policy, and when making
that payment is sufficient to maintain the policy for some pe-
riod without requiring some additional payment, it qualifies
as a premium under that term’s common meaning.” Cooke v.
Jackson Nat’l Life Ins. Co., 243 F. Supp. 3d 987, 996 (N.D. Ill.
2017), rev’d on other grounds, 919 F.3d 1024 (7th Cir. 2019).
Here, Minnesota Life refers to premiums as the planned
amount the policyholder pays for this policy, which it distin-
guishes from the required policy charges necessary to keep
the policy in force. Because the flexible premium policy al-
lows the policyholder to set the amount and frequency of the
premium payments, defendant argues that Mrs. Perlas’s deci-
sion to change her annual planned premium payment to zero
makes Section 234 inapplicable. But we see nothing in the stat-
ute that indicates the legislature intended to exempt entirely
from the statute flexible life insurance policies like the one at
issue here.
Instead, we look to whether the required policy charges
functioned in substance as premiums—payments needed to
keep the policy in force—under the statute. The required
charges covered the costs of insurance and other
administrative expenses that Minnesota Life required to
maintain coverage. If the policy did not have an accumulation
value sufficient to cover the required payments, the grace
period was triggered, which allowed the policyholder to cure

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No. 25-1315 9
the default by paying the owed amount. Without payment,
the policy would terminate. Further, even if the policyholder
paid his planned premiums, Minnesota Life still warned that
“it is possible that the Policy may terminate before the death
of the insured due to changes in interest credited, and
monthly charges.” In other words, regardless of how
Minnesota phrased its policy, the required charges were in
substance premiums “required by the terms of the policy to
be paid,” such that the policy would lapse “by reason of
nonpayment.” 215 Ill. Comp. Stat. 5/234(1). Because these
required charges were premiums under the statute, we next
determine whether the exception in Section 234(2) applies.
B. Monthly-or-Shorter Exception
The notice and grace-period requirements of Section
234(1) do not apply to policies with premiums payable in
monthly or shorter intervals. 215 Ill. Comp. Stat. 5/234(2). The
district court held that the Section 234(2) exception does not
apply but that Minnesota Life’s required payment notice was
sufficient to satisfy Section 234(1). Our analysis need not go so
far. Instead, we find that the monthly assessment of charges,
meaning premiums, under this policy satisfies the Section
234(2) exception.
We explained above that the required account charges
constitute premiums under Section 234. Because those
charges are charged monthly on the policy anniversary date,
the premiums needed to maintain the policy fall within the
Section 234(2) exception. The plain language of Section
234(2)—that the premiums be "payable monthly or in shorter
intervals"—does not restrict the section’s application to when
the policyholder chooses to make the required premium pay-
ments. Instead, we look to when the premiums were payable,

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10 No. 25-1315
or when they were assessed and charged, which here was on
each monthly anniversary of the policy. In effect, the Minne-
sota Life policy in this case allowed the policyholder to accu-
mulate a surplus in an account with the company, and such
surplus amounts could be used to pay the required monthly
charges. That flexibility did not change the fact that the
charges were assessed and payable every month, either from
the policy’s accumulated value or in the form of a new pay-
ment.
To escape the Section 234(2) exception, plaintiff Dahleh ar-
gues that the grace-period process, at least as he used it to de-
lay his payments, made the premium effectively a quarterly
premium rather than a monthly one. He bases this argument
on the fact that the grace period was 61 days and the required
payment was three times the required monthly charges. We
reject this theory. The policy provided that the required
charges that constituted the premiums for this policy were
“assessed in advance on the policy date and at every monthly
policy anniversary.” The grace period was triggered only
when the policyholder missed the monthly payment, whether
from the surplus accumulation account or from a new pay-
ment. For example, in March 2020, October 2020, and May
2021, Dahleh had sufficient funds in the policy’s accumulation
account to pay the required charges, so the grace period was
not triggered for those months. The grace periods did not
show that the premiums were payable quarterly. They were
instead merely a consequence of plaintiff’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. In substance, the required charges were still
payable monthly.

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No. 25-1315 11
Further, if we were to adopt plaintiff’s position that Sec-
tion 234’s notice requirements apply to this policy, the result
would lead to an impossible dead end for an insurer trying to
comply with the law when a policyholder failed to make re-
quired payments. Where Section 234 applies, it “requires a life
insurance carrier to provide notice of an overdue premium to
a policyholder before the company can lawfully cancel a pol-
icy.” Hotaling v. Chubb Sovereign Life Ins. Co., 241 F.3d 572, 579
(7th Cir. 2001). By its terms, Section 234 requires the insurer
to provide appropriate notice to the policyholder between 15
and 45 days “before the beginning of the period of grace.” 215
Ill. Comp. Stat. 5/234(1); Time Ins. Co. v. Vick, 250 Ill. App. 3d
465, 474, 620 N.E.2d 1309, 1316 (1993) (“Section 234(1), there-
fore, requires that notice be given before the premium be-
comes due, not when a premium has not been paid.”), appeal
denied, 153 Ill. 2d 570, 624 N.E.2d 817 (1993).
The grace period here began on the monthly policy anni-
versary when there were insufficient funds in the policy-
holder’s account to cover the required monthly charges. If
Section 234(1) applied here, plaintiff’s position would mean
that the insurer violated the statute by failing to notify a poli-
cyholder that he was in default at least fifteen days before he
was in default. That’s nonsense. Because the required charges
were due monthly, and because the insurer could not know
whether the account would have sufficient funds to pay the
required charges until the date the charges were due, apply-
ing this statute here would require the insurer to provide no-
tice of the hypothetical curative payments before Minnesota
Life even knew the grace period had been triggered. The Sec-
tion 234(2) exception works to prevent such a confusing co-
nundrum by exempting the circumstances present in this

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12 No. 25-1315
case, as well as more typical life insurance policies with
monthly premium requirements.
Accordingly, defendant was not required by Section 234
to provide statutory notice before terminating plaintiff’s pol-
icy. There are no further disputed issues of material fact that
preclude summary judgment here. Minnesota Life properly
terminated the policy for failure to pay premiums as required.
The judgment of the district court is AFFIRMED.

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