American Family Mutual Insurance Company v. Krop
2017 IL App (1st) 161071
| Ill. App. Ct. | 2017Background
- In March 2012 the Krops met with American Family agent Andy Vargas and requested homeowner coverage equivalent to their prior Travelers policy (which covered personal injury/libel, slander, invasion of privacy). American Family issued a policy that did not include personal-injury/intentional-act/abuse coverage.
- The Krops renewed the American Family policy several times (2013–2015) and did not complain upon receipt.
- In May 2014 the Krops' son was sued for defamation, invasion of privacy, and intentional infliction of emotional distress; the Krops sought coverage and American Family denied the claim on August 20, 2014 (citing policy exclusions and an asserted 2011 incident date).
- American Family filed for declaratory judgment that the policy excluded coverage. The Krops filed a counterclaim against American Family and a third-party complaint against Vargas alleging negligence/failure to procure requested coverage under 735 ILCS 5/2-2201(d).
- American Family and Vargas moved to dismiss under section 2-619 as time-barred by the two-year limitations period for actions against insurance producers; the trial court granted dismissal. The Krops appealed.
- The appellate court reversed, holding the cause of action against the agent accrued upon denial of coverage (August 20, 2014), so the Krops’ September 22, 2015 filing was timely.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| When did the two-year limitations period for the Krops' claim against their insurance agent accrue (triggering the discovery rule)? | American Family: accrual occurred when the policy was received in 2012; discovery rule inapplicable because insureds had duty to read the policy and the deficiency was apparent on its face. | Krops: accrual was tolled by the discovery rule and did not begin until the insurer denied coverage (Aug. 20, 2014). Vargas: similar to American Family; discovery rule doesn't apply if deficiency is apparent from the policy. | The court held accrual occurred at the time of the denial of coverage; the discovery rule tolled the limitations period until Aug. 20, 2014, so the Krops' claims filed Sept. 22, 2015 were timely. |
Key Cases Cited
- West American Insurance Co. v. Sal E. Lobianco & Son Co., 69 Ill. 2d 126 (distinguishes accrual rules for tort vs. contract)
- Perelman v. Fisher, 298 Ill. App. 3d 1007 (insured–agent fiduciary relationship; 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)
- State Farm Fire & Casualty Co. v. John J. Rickhoff Sheet Metal Co., 394 Ill. App. 3d 548 (follows Broadnax accrual-at-denial rule)
- Indiana Insurance Co. v. Machon & Machon, Inc., 324 Ill. App. 3d 300 (contrast in accrual where insurer sues agent)
- Hermitage Corp. v. Contractors Adjustment Co., 166 Ill. 2d 72 (discovery rule standards)
- Foster v. Crum & Forster Insurance Cos., 36 Ill. App. 3d 595 (insured's duty to read policy)
- Black v. Illinois Fair Plan Ass’n, 87 Ill. App. 3d 1106 (insured v. broker duties and discovery rule context)
- Economy Fire & Casualty Co. v. Bassett, 170 Ill. App. 3d 765 (similar principle regarding broker liability)
- General Casualty Co. of Illinois v. Carroll Tiling Service, Inc., 342 Ill. App. 3d 883 (applies discovery-rule accrual on denial of coverage)