American Family Mutual Insurance Co. v. Krop
82 N.E.3d 533
Ill. App. Ct.2017Background
- In March 2012 the Krops met with American Family agent Andy Vargas and asked him to procure homeowner coverage equivalent to their prior Travelers policy (which included personal-injury and intentional-act coverage).
- American Family issued a policy on March 21, 2012 that omitted personal-injury, intentional-act, and abuse coverage; the Krops renewed the policy through 2015 and did not complain upon receipt.
- A suit alleging defamation, invasion of privacy, and intentional infliction of emotional distress against the Krops’ son was filed in May 2014; American Family denied coverage on August 20, 2014, citing policy exclusions and that the events occurred in 2011.
- American Family filed a declaratory-judgment action seeking a ruling that its policy excluded coverage; the Krops filed a counterclaim and a third-party complaint (Sept. 22, 2015) alleging Vargas negligently failed to procure requested coverage.
- American Family and Vargas moved to dismiss under 735 ILCS 5/2-619(a)(9), arguing the Krops’ claims were time-barred by the two-year statute for claims against insurance producers; the trial court granted dismissal.
- The appellate court reversed, holding the claims against the agent accrued at denial of coverage (Aug. 20, 2014), so the Krops’ suit filed Sept. 22, 2015 was timely.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the two-year limitations period for claims against an insurance producer began when the policy was issued or when coverage was denied | American Family: limitations began when policy was issued/insured had duty to read policy | Krops/Vargas: discovery rule tolled accrual until denial of coverage | Held: accrual occurred on denial of coverage; discovery rule tolled statute; claims timely |
| Whether the discovery rule applies to insureds suing their insurance agent for negligent procurement | American Family: discovery rule inapplicable because policy’s deficiencies were apparent on face and insureds had duty to read | Krops: discovery rule applies because fiduciary relationship and agent’s breach accrues when coverage denial occurs | Held: discovery rule applies in insured-agent fiduciary context; accrual upon denial |
| Whether prior First District decision in Hoover controls and forecloses tolling | American Family: Hoover holds policy receipt triggers accrual | Krops: Hoover is distinguishable and contrary to weight of authority | Held: court declines to follow Hoover; follows broader line holding accrual at denial |
| Whether the trial court properly granted dismissal under section 2-619 | American Family: undisputed facts show untimeliness | Krops: factual dispute as to when they knew of injury | Held: construing facts in favor of Krops, no genuine dispute—accrual at denial—so dismissal was improper and reversed |
Key Cases Cited
- West American Insurance Co. v. Sal E. Lobianco & Son Co., 69 Ill.2d 126 (distinguishes tort v. contract accrual rules)
- Perelman v. Fisher, 298 Ill. App.3d 1007 (insured-agent fiduciary duties; discovery rule may toll accrual against agent)
- Broadnax v. Morrow, 326 Ill. App.3d 1074 (cause of action against agent accrues at denial of coverage)
- Indiana Insurance Co. v. Machon & Machon, Inc., 324 Ill. App.3d 300 (accrual rules where insurer sues its agent)
- State Farm Fire & Casualty Co. v. John J. Rickhoff Sheet Metal Co., 394 Ill. App.3d 548 (follows accrual-at-denial rule)