2016 IL App (1st) 143161
Ill. App. Ct.2016Background
- Intrust purchased a Kansas Bankers financial institution "crime bond" covering multiple crimes (including a fidelity insuring agreement) effective Dec 20, 1999–Dec 20, 2000, with notice/proof and suit-timeliness clauses (30-day notice, 6‑month proof, and suit within 60 days after proof or within 24 months of discovery).
- Intrust notified Kansas Bankers of a potential covered loss on March 10, 2000. The Illinois Commissioner took possession of Intrust and appointed a receiver on April 14, 2000; the receiver discovered the loss on June 1, 2000 (≈ $68M shortage). Kansas Bankers sent a premium refund and said the bond terminated on receivership.
- Intrust submitted a one‑page unsworn “Proof of Loss” on Oct 25, 2000 and an amended, notarized proof on Nov 30, 2000. Kansas Bankers requested additional documentation in December 2000; Intrust did not supply it.
- Intrust filed suit for indemnity under several insuring agreements on March 19, 2004. Kansas Bankers asserted defenses including the bond’s termination on receivership, failure of timely notice/proof, and that the 24‑month suit limitation ran.
- On appeal and remand courts addressed tolling under the Illinois Fiduciary Act (205 ILCS 620/6‑7.1) and section 143.1 of the Illinois Insurance Code (215 ILCS 5/143.1). The appellate court ultimately held the crime bond is fidelity insurance and that section 143.1’s tolling provision (which would have tolled the 24‑month suit period from proof until denial) does not apply to fidelity and surety policies.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did section 143.1 toll the 24‑month suit period so Intrust’s 2004 suit was timely? | Intrust: Kansas Bankers never denied the claim before suit, so section 143.1 tolled the 24‑month limitations from filing proof until denial. | Kansas Bankers: The crime bond is fidelity/surety insurance and fidelity/surety policies are exempt from section 143.1, so no statutory tolling applies. | Held: The bond is fidelity insurance; section 143.1’s tolling exception applies to fidelity/surety policies, so no tolling — suit untimely. |
| Was the crime bond terminated by appointment of a receiver (policy provision) or tolled by the Fiduciary Act? | Intrust: Section 6‑7.1 of the Fiduciary Act tolls termination where a claim/right existed at receivership appointment (so termination provision voided). | Kansas Bankers: Termination provision operated to end coverage on appointment. | Held (prior appellate ruling adopted as law of the case): Section 6‑7.1 tolled the termination provision; termination clause conflicted with public policy and did not bar deadlines for the receiver. |
| Were Intrust’s notice and proof of loss timely and sufficient under the bond? | Intrust: March 10, 2000 notice + Oct/Nov 2000 proof(s) satisfied bond requirements (court earlier found proof adequate). | Kansas Bankers: March 10 letter was not post‑discovery notice; proof(s) lacked required particulars and sworn form initially. | Held: Court found Oct 25 and Nov 30, 2000 submissions constituted timely proof of loss for purposes of investigation, but factual issues on some particulars persisted; however, proof existed for section 143.1/timeliness analysis. |
| Should equitable tolling save Intrust’s claim? | Intrust: Kansas Bankers’ conduct (keeping claim open, not denying) misled Intrust and prevented suit within limitation. | Kansas Bankers: It requested further information and never misled; Intrust failed to cooperate. | Held: Equitable tolling not applicable—Intrust failed to show extraordinary barrier or active misleading; it did not diligently pursue the claim after December 2000. |
Key Cases Cited
- Private Bank & Trust Co. v. Progressive Casualty Insurance Co., 409 F.3d 814 (7th Cir.) (policy construction/de novo review principles for bond language)
- First State Bank of Monticello v. Ohio Casualty Insurance Co., 555 F.3d 564 (7th Cir.) (financial institution bonds treated as fidelity bonds)
- RBC Mortgage Co. v. National Union Fire Insurance Co. of Pittsburgh, 349 Ill. App. 3d 706 (Ill. App. Ct.) (referring to financial institution bonds as fidelity insurance)
- Clay v. Kuhl, 189 Ill. 2d 603 (Ill. 2000) (standards for equitable tolling of limitations)