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FIRST DIVISION
June 30, 2003

JUSTICE SMITH delivered the opinion of the court:

This is a breach of contract case, arising out of the non-payment of benefits to plaintiff,

Dr. Busse, under two disability income insurance policies. Trial has not yet taken place below,and the case is before this court pursuant to an appeal under Supreme Court Rule 308(a) (155 Ill.2d R. 308(a)). The question certified for this court's review is:

Does I.P.I. 700.00 authorize recovery of future damages based upon a repudiation theory where a plaintiff alleges a breach ofcontract and a section 155 claim in the context of a disability insurance policy calling for periodic payment of benefits basedupon certain conditions precedent, including continued disability?

FACTUAL BACKGROUND ⁽¹⁾

Dr. Busse is an anesthesiologist who, in 1989, purchased from Provident Mutual LifeInsurance Company (Provident) an "own occupation" disability income insurance policy, and in1994 purchased similar insurance from Paul Revere Life Insurance Company (Paul Revere). Under the terms of both policies, Dr. Busse was to receive benefits on a monthly (periodic) basis,in the event that he became unable to practice anesthesiology due to mental or physical illness. The Provident policy was to pay Dr. Busse until he reached the age of 65; the Paul Revere policywas to pay Dr. Busse for life. Benefits under both policies were made subject to the submissionby Dr. Busse of written proofs of loss within 90 days after the end of each monthly period of thetime for which he was claiming benefits. Neither policy provides for benefits related to"permanent" disability, nor does either include provisions for or circumstances under whichdisability benefits could become accelerated or payable on a lump sum basis.

In May of 1995, Dr. Busse paralyzed a patient while administering a spinal anesthetic.⁽²⁾ After injuring his patient, Dr. Busse began to suffer from major depression and other mentalillness, including uncontrollable anxiety. He also experienced involuntary tremors. He wasobliged to give up his staff privileges at Illinois Masonic Medical Center. Dr. Busse begantreatment with Dr. Cahnmann, Ph.D., a licensed professional clinical counselor and Dr. Kurland,M.D., a psychiatrist, both of whom have repeatedly and continuously certified that he iscompletely disabled and unable to practice anesthesiology. They are both of the opinion that thiscondition is permanent. Dr. Busse has been and continues to be on a daily regimen of prescribedmedications, some of which are psychotropic, including Wellbutrin, Serazone, Propanolol,Neurotin and Risperdol.

In the fall of 1995, Dr. Busse made a claim on both of his policies, pursuant to whichboth Provident and Paul Revere began to pay him monthly income benefits. Payment of thesebenefits continued for approximately three years. In 1998, evidently pursuant to an investigationinto Dr. Busse's disability status, the companies received a copy of a document filed in the courseof Dr. Busse's divorce proceedings in the Circuit Court of Cook County. The document, entitled"Answer to Motion For Psychiatric Evaluation," contains the following statement:

"The Respondent (Busse) did claim that he was out of work due to disability and due to his immigration status which bars himfrom working legally in this country. The Respondent is now waiving his claim to be out of work due to disability, andtherefore denies the allegation contained in paragraph 2 of said Motion."

Following their receipt of the document, the companies asked Dr. Busse to undergoindependent medical examinations. Dr. Busse was first examined by a psychologist, who wasunable to obtain a valid diagnosis due to the psychotropic drugs Dr. Busse was taking. Dr. Bussewas then referred to a psychiatrist qualified to evaluate a medicated subject. This psychiatristfound Dr. Busse to be completely disabled and unable to practice anesthesiology.

An internal memorandum from Provident's claim department dated May 5, 1998 indicatesthat Dr. Busse's "IME's appear to support [total disability] at this time." Nevertheless, during themonth of June, correspondence was being exchanged between Dr. Busse and the companies inwhich the companies stated that Dr. Busse's "waiver" of his disability claim in the context of hisdivorce proceeding was "inconsistent" with the policy's definition of disability due to mental orphysical illness, and that benefits would accordingly be discontinued.⁽³⁾ There was additionallysome evidence that Dr. Busse was working, though not in the field of anesthesiology or evenmedicine.

Prior to filing suit, Dr. Busse filed a complaint with the Illinois Department of Insurance. The Department opened an inquiry, pursuant to which the companies were directed to and didfile with the Department a statement of the basis for denial of benefits in this case, along withany supporting records from their claims files. In a letter to the companies dated October 28,1998, the Department set forth its conclusion that there was no basis for the companies'continued denial of Dr. Busse's claims, and further stated that the correspondence it had receivedfrom the companies did not adequately explain their denial.

According to Dr. Busse, the companies subsequently wrote to him and cancelled hispolicies. The record shows that on January 6, 1999, Provident cancelled Dr. Busse's policy, fornon-payment of premiums (benefits were never reinstated after the initial denial in mid 1998). Both companies deny that their policies were ever cancelled or otherwise rescinded.

Dr. Busse filed his initial two-count complaint on October 16, 1998. Count I allegedbreach of contract against both companies.⁽⁴⁾ Count II alleged that the companies' failure andrefusal to pay under the contracts of insurance was vexatious, unreasonable, and done in badfaith, warranting damages pursuant to