2020 IL App (1st) 191125
Ill. App. Ct.2020Background
- Austin Highlands Development Co. owns/agents apartment-owning entities; Midwest Insurance Agency procured insurance for Austin under an AIG-affiliated policy issued November 16, 2015.
- In March 2016 Austin was named in a federal class action about tenant security deposits; Austin delivered the complaint to Midwest and was told (~Aug 25, 2016) the policy did not cover the claims.
- Austin settled the federal suit for over $300,000 and then sued Midwest on October 4, 2018 for negligent procurement under section 2-2201 (failure to procure requested coverage).
- Midwest moved to dismiss under section 2-619.1, arguing the two-year limitations period in 735 ILCS 5/13-214.4 accrued when Austin received the policy and therefore Austin’s suit (filed ~3 years after issuance) was time-barred.
- The circuit court found Midwest to be an "insurance producer," applied the Illinois Supreme Court’s accrual rule from Krop (accrual on policy delivery), dismissed Austin’s complaint with prejudice, and Austin appealed asserting (1) Midwest was its agent/broker so accrual did not occur on receipt and (2) the two-year statute is unconstitutional special legislation.
- The appellate court affirmed: Midwest is an insurance producer; accrual occurred upon delivery/receipt of the policy; Austin’s suit was untimely; Austin’s constitutional challenge failed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| When does a negligent-procurement claim against an insurance producer accrue for purposes of the 2-year limitation? | Austin: accrual did not occur on issuance/receipt because Midwest acted as its agent/broker working for Austin; suit is timely. | Midwest: is an "insurance producer"; under Krop accrual occurs when the insured receives the policy, so suit filed after two years is untimely. | Court: Midwest is an insurance producer; accrual occurs on delivery/receipt of the allegedly deficient policy per Krop; Austin’s Oct 2018 suit was time-barred. |
| Is the two‑year statute (735 ILCS 5/13-214.4) unconstitutional special legislation? | Austin: the statute confers special insulation on insurance producers and thus violates the Illinois Constitution’s special legislation clause. | Midwest: statute presumptively constitutional; Austin failed to identify a similarly situated group excluded or otherwise meet the burden to show special legislation. | Court: Austin failed to meet its burden; no showing of an arbitrary classification or excluded similarly situated group; statute upheld. |
Key Cases Cited
- American Family Mut. Ins. Co. v. Krop, 2018 IL 122556 (Ill. 2018) (held negligent-procurement claims accrue when insured receives the allegedly deficient policy).
- Skaperdas v. Country Casualty Ins. Co., 2015 IL 117021 (Ill. 2015) (defined "insurance producer" under section 2-2201 to include licensed agents and brokers).
- Perelman v. Fisher, 298 Ill. App. 3d 1007 (Ill. App. Ct. 1998) (pre-Public Act 89-638 case recognizing broker fiduciary duty and fact questions on discovery/delay).
- Sandholm v. Kuecker, 2012 IL 111443 (Ill. 2012) (standard for section 2-619 motions and de novo review).
- Kedzie & 103rd Currency Exchange, Inc. v. Hodge, 156 Ill. 2d 112 (Ill. 1993) (standard for reviewing whether dismissal on limitations ground was appropriate).
- Moline School Dist. No. 40 Bd. of Educ. v. Quinn, 2016 IL 119704 (Ill. 2016) (explains special legislation clause analysis and two-step test).