Alternative Plan of Care Clauses Do Not “Provide” Home-Health Benefits Under Illinois § 2012.70(a)(2) Absent an Express Home-Care Benefit

I. Introduction

Patrick M. Hartnett and Daniel J. Hartnett, as Successor Trustees of the Lorrayne B. Hartnett Trust dated June 27, 1984 (collectively, “Hartnett”) sued Jackson National Life Insurance Company (“Jackson National”) for breach of contract after the insurer denied reimbursement for home post-surgical care during the COVID-19 pandemic.

Lorrayne Hartnett purchased a Nursing Care Policy in 1998 (later assumed by Jackson National). The policy primarily covered care in institutional settings (nursing care facilities or assisted living facilities) but included an alternative plan of care provision that could allow coverage in different settings if specific conditions were met, including (as the insurer read it) that the insured be already receiving benefits under the policy and that the parties mutually agree to the alternative plan.

After Hartnett fractured her hip in May 2021, her physician prescribed home care due to heightened COVID risk in a facility. Jackson National denied coverage, asserting the policy did not include a home-health benefit and that the alternative plan provision could not be invoked because Hartnett was not already receiving institutional benefits. The district court granted summary judgment for Jackson National, and the Seventh Circuit affirmed.

The appeal raised two core issues:

  • Whether an Illinois regulation—Ill. Admin. Code tit. 50, § 2012.70(a)(2)—combined with a conformity-with-state-statutes clause, effectively amended the policy to prohibit conditioning home-care coverage on prior institutional care.
  • Whether denial of the claim breached the implied covenant of good faith and fair dealing.

Judge Ripple dissented in part, contending the court should have certified the key state-law question to the Illinois Supreme Court.

II. Summary of the Opinion

The Seventh Circuit (Judge Kirsch) affirmed summary judgment for Jackson National on two principal grounds:

  1. Illinois § 2012.70(a)(2) did not apply because Hartnett’s Nursing Care Policy did not “provide[] benefits for home health care” within the meaning of the regulation. The alternative plan of care clause was characterized as a discretionary mechanism to request coverage outside the policy’s normal scope—not an affirmative home-care benefit.
  2. The implied covenant of good faith and fair dealing could not override an express contract condition requiring that the insured be “receiving benefits under this policy” before the alternative plan benefit would be payable. Because Hartnett was not receiving benefits when she requested home care, Jackson National was entitled to deny the claim under the policy’s terms.

The dissent would have certified to the Illinois Supreme Court whether an alternative plan of care provision constitutes “benefits for home health care” under § 2012.70(a)(2), emphasizing the novelty and regulatory importance of the question.

III. Analysis

A. Precedents Cited

1. Standards of review and interpretive posture

  • Ross v. Fin. Asset Mgmt. Sys., Inc., 74 F.4th 429 (7th Cir. 2023): Cited for de novo review of cross-motions for summary judgment and construing inferences against the movant. This frames the appellate posture as purely legal (no material fact dispute), making policy/regulation interpretation decisive.
  • Green Plains Trade Grp., LLC v. Archer Daniels Midland Co., 90 F.4th 919 (7th Cir. 2024): Used for de novo review of state-law interpretation—important because the dispute turned on the meaning of an Illinois administrative regulation.
  • Miller v. St. Paul Mercury Ins. Co., 683 F.3d 871 (7th Cir. 2012): Cited for de novo review of insurance-policy interpretation, anchoring the court’s authority to decide the contract meaning without deference.
  • ABW Dev., LLC v. Cont'l Cas. Co., 203 N.E.3d 922 (Ill. App. Ct. 2022): Used to place the burden on the insured to prove coverage. This allocation matters because Hartnett’s theory required showing the policy (as amended by conformity) affirmatively covered home care.

2. Certification and “uncertainty” in state law

  • Telamon Corp. v. Charter Oak Fire Ins. Co., 850 F.3d 866 (7th Cir. 2017): The majority relied on this principle—“We certify questions only when the answer is unclear.”—to justify deciding § 2012.70(a)(2) without certification, concluding the regulation was unambiguous.
  • Johnson v. Amazon.com Servs. LLC, 142 F.4th 932 (7th Cir. 2025): The dissent invoked this case to explain “outcome determinative” for certification: a certified question need not resolve the entire case, only a dispositive step (here, whether the insurer could condition home-care payments on prior institutional care).
  • Finite Res., Ltd. v. DTE Methane Res., LLC, 44 F.4th 680 (7th Cir. 2022): The dissent cited Finite Res. for the multi-factor certification framework and for emphasizing that “genuine uncertainty” is the most important factor.
  • Cothron v. White Castle Sys., Inc., 20 F.4th 1156 (7th Cir. 2021): The dissent used Cothron to underscore that certification is especially apt when a legal issue is likely to recur rather than being “unique and fact bound.”

3. Alternative plan of care provisions and discretion

  • Mansur v. PFL Life Ins. Co., 589 F.3d 1315 (10th Cir. 2009): The majority quoted Mansur for the idea that treating an alternative plan of care clause as an affirmative entitlement would be “inconsistent with the flexibility” inherent in such provisions. The dissent distinguished Mansur on textual grounds: Mansur involved “We will consider” language, whereas Hartnett’s provision stated “we will pay … if” enumerated conditions are met.
  • Roland v. Transamerica Life Ins. Co., 570 F. Supp. 2d 871 (N.D. Tex. 2008), aff'd, 337 Fed. App'x 389 (5th Cir. 2009): Used in the dissent to illustrate how other courts handled alternative plan provisions, again highlighting that those cases did not answer whether such contemplated services constitute “benefits” under a state regulatory definition.

4. Implied covenant of good faith under Illinois law

  • Soarus LLC. v. Bolson Materials Int'l Corp., 905 F.3d 1009 (7th Cir. 2018): Cited for applying Illinois law and de novo review to contract interpretation in the good-faith analysis.
  • N. Tr. Co. v. VIII S. Mich. Assocs., 657 N.E.2d 1095 (Ill. App. Ct. 1995): Central to the majority’s holding that the implied covenant cannot “overrule or modify” express contract terms. This provided the doctrinal barrier to Hartnett’s good-faith claim once the express precondition (already receiving benefits) was unmet.

5. State primacy in insurance regulation (dissent’s policy frame)

  • Hines v. Dep't of Pub. Aid, 221 Ill. 2d 222, 850 N.E.2d 148 (2006): Cited by the dissent to show the Illinois Supreme Court has scarcely addressed long-term care insurance, reinforcing the argument for certification.
  • Barnett Bank of Marion Cnty., N.A. v. Nelson, 517 U.S. 25 (1996) and United States Dep't of Treasury v. Fabe, 508 U.S. 491 (1993): Cited to support the dissent’s emphasis on state supremacy in insurance regulation under the McCarran-Ferguson Act, 15 U.S.C. § 1011 et seq.

B. Legal Reasoning

1. The majority’s core interpretive move: “provides benefits” means an affirmative policy entitlement

The decisive statutory-regulatory phrase was whether the policy “provides benefits for home health care” under Ill. Admin. Code tit. 50, § 2012.70(a)(2). That regulation forbids certain limitations (including conditioning home health care on first receiving nursing/therapeutic services in institutional settings) only if the policy provides home-health or community-care benefits.

The majority treated this threshold as a gating inquiry: if the policy does not itself provide home-health benefits, then § 2012.70(a)(2) never attaches, and the conformity-with-state-statutes clause does not import that rule into the contract.

To reach that conclusion, the majority emphasized:

  • The Nursing Care Policy lacked any schedule or guarantee of home-health benefits (in contrast to the “Comprehensive Long Term Care Policy,” which expressly listed home/community benefits).
  • The alternative plan of care provision was not a benefit category like “home health care” but a discretionary mechanism to request out-of-scope services, contingent on preconditions and mutual agreement.
  • Treating “alternative plan of care” as “home-health benefits provided by the policy” would collapse the distinction between an institutional policy and a comprehensive home-care policy.

2. The dissent’s competing interpretation: alternative plan “benefits” may be benefits for home health care

Judge Ripple argued that the meaning of “provides benefits” in § 2012.70(a)(2) is uncertain when a policy labels an “Alternative Plan of Care Benefit” as a benefit and when the benefit schedule describes it as payable to end institutional confinement and “continue recovery at home.” In his view:

  • The regulation does not define “benefits,” nor does it speak directly to alternative plan provisions.
  • The policy’s own text repeatedly uses “benefit” terminology for the alternative plan, suggesting it is not merely a nonbinding possibility.
  • Unlike Mansur and Roland, Hartnett’s provision used “we will pay … if” language, arguably making the insurer’s obligation less discretionary than “we will consider” formulations.

Based on these uncertainties and the public importance of insurance regulation, the dissent would have certified the interpretive question to the Illinois Supreme Court.

3. Good faith and fair dealing: express conditions control

On the implied covenant claim, the majority took a strictly orthodox Illinois-contract approach: parties may insist on the contract “to the letter,” and good faith cannot rewrite express terms. Because the alternative plan benefit required the insured to already be “receiving benefits under this policy,” and because Hartnett was not, the insurer’s denial could not be a breach—regardless of the harsh practical dilemma posed by the pandemic.

C. Impact

1. Contract drafting and product differentiation in long-term care insurance

The decision strengthens insurers’ ability to preserve distinctions between “nursing care only” products and “comprehensive” products. In the Seventh Circuit, an alternative plan of care clause—without an explicit home-care benefit schedule—can be treated as non-coverage rather than coverage for purposes of regulatory triggers that apply only when a policy “provides” home-health benefits.

2. Litigation posture: threshold regulatory applicability becomes a dispositive coverage issue

Future insureds invoking § 2012.70(a)(2) (and similar model-regulation language in other states) may face an initial hurdle: proving that their policy affirmatively provides home-health benefits, not merely that it contemplates home care via an alternative plan mechanism. This shifts disputes away from whether a particular limitation is unlawful and toward whether the policy crosses the “provides benefits” threshold at all.

3. Certification dynamics and state-law development

The split opinion signals a live debate over whether federal courts should decide such insurance-regulation questions without state high-court input. The dissent’s emphasis on state primacy under McCarran-Ferguson and the novelty of the Illinois regulation suggests litigants may more aggressively seek certification in future long-term care disputes, particularly where policy text is closer to a “we will pay if” structure.

IV. Complex Concepts Simplified

  • Alternative plan of care (APOC): A clause that allows a different care arrangement (often home care) instead of the policy’s default setting (often a facility), usually only if specified conditions are met and the insurer agrees. The majority viewed this as a flexible exception process, not a built-in home-care entitlement.
  • Conformity-with-state-statutes provision: A contract clause stating the policy will be amended to comply with state law if there is a conflict. It matters only if the state law actually applies to the policy’s terms; here, the majority held § 2012.70(a)(2) did not apply because the policy did not “provide” home-health benefits.
  • Ill. Admin. Code tit. 50, § 2012.70(a)(2): A regulation that prevents insurers from imposing certain prerequisites (like requiring institutional care first) when a long-term care policy provides home-health/community-care benefits. The entire case turned on what “provides benefits” means in this context.
  • Implied covenant of good faith and fair dealing: A background rule that parties must exercise contractual discretion honestly and not sabotage the contract’s purpose. Under Illinois law (as applied here), it cannot be used to override clear, express contractual conditions—even if the outcome seems unfair in practice.
  • Certification of a state-law question: A procedure allowing a federal court to ask a state supreme court to decide an unsettled question of state law. The majority believed the regulation was clear enough to decide; the dissent saw genuine uncertainty and public importance warranting certification.

V. Conclusion

Hartnett v. Jackson National Life Insurance Company establishes (at least within the Seventh Circuit applying Illinois law) that an alternative plan of care provision does not, by itself, mean a long-term care policy “provides benefits for home health care” for purposes of Ill. Admin. Code tit. 50, § 2012.70(a)(2). Without an express home-care benefit, the regulation’s anti-conditioning rule does not attach, and a conformity clause will not import it.

The decision also reaffirms a strict boundary on good-faith claims under Illinois law: the implied covenant cannot be used to evade explicit coverage prerequisites, even in exceptional circumstances like pandemic-driven medical risk. The partial dissent highlights an unresolved policy tension—whether novel, consequential insurance-regulation questions should be certified to the Illinois Supreme Court— foreshadowing continued litigation over the regulatory status of alternative plan of care “benefits.”