Scottsdale Insurance Co. v. Lakeside Community Committee, 2016 IL App (1st) 141845

Lakeside Community Committee, a DCFS contractor, hired W.A. George (an insurance broker) in early 2009 to procure liability insurance; Scottsdale issued a CGL policy that mischaracterized Lakeside as a “halfway house.”
In October 2010 two-year-old Angel Hill, a DCFS ward monitored by Lakeside, died from blunt-force trauma after Lakeside allegedly failed to act on a report of bruising.
The Cook County Public Guardian (as administrator of Angel’s estate) sued Lakeside for wrongful death; Lakeside settled for $3.5 million and assigned its claims against W.A. George to the public guardian.
Scottsdale denied coverage in May 2012 and sued for a declaratory judgment; Lakeside then sued W.A. George for negligence, fraud, breach of contract, and breach of fiduciary duty for procuring inadequate insurance.
W.A. George moved to dismiss under section 2-619, arguing Lakeside’s claims were time-barred by the two-year limitations period in 735 ILCS 5/13-214.4 because the policy was procured in 2009.
The trial court dismissed Lakeside’s claims as barred by the statute of limitations; the appellate court reversed, holding the claim accrued when Lakeside learned of the denial of coverage.

Issue	Plaintiff's Argument	Defendant's Argument	Held
When did a cause of action against an insurance producer under 735 ILCS 5/13-214.4 accrue?	Accrual is governed by the discovery rule and did not occur until Scottsdale denied coverage (May 4, 2012).	Accrual occurred when W.A. George procured the policy in 2009 because Lakeside could and should have reviewed the policy then.	Accrual occurs when the insured learns (or reasonably should learn) of the denial of coverage; discovery rule may delay accrual until denial is known.
Did Lakeside have a duty to read the policy such that the limitations period began when the policy was issued?	Lakeside argues it could not reasonably have known a claim involving a child’s murder in DCFS custody would be excluded and so could not have discovered the alleged procurement error by reading the policy at issuance.	W.A. George relies on Hoover and contends delivery of the policy put Lakeside on notice of deficiencies; plaintiff had responsibility to read the policy.	Court distinguished Hoover and held circumstances differ; mere delivery or characterization on the policy did not necessarily trigger accrual where insured lacked reason to foresee the specific claim — here accrual was when coverage was denied.

Broadnax v. Morrow, 326 Ill. App. 3d 1074 (2002) (accrual of claim against insurance agent occurs when coverage is denied)
Indiana Ins. Co. v. Machon & Machon, Inc., 324 Ill. App. 3d 300 (2001) (discovery rule applies to delay accrual of claims against insurance agents until denial of coverage is known)
General Casualty Co. v. Carrol Tiling Serv., Inc., 342 Ill. App. 3d 883 (2003) (discovery rule tolled insurer’s claim against agent until insurer learned of coverage denial)
State Farm Fire & Casualty Co. v. John J. Rickhoff Sheet Metal Co., 394 Ill. App. 3d 548 (2009) (cause of action against broker accrues when coverage is denied; discovery rule may extend accrual until denial is discovered)
Knox Coll. v. Celotex Corp., 88 Ill. 2d 407 (1981) (formulation of the discovery rule: limitations tolled until plaintiff knows or reasonably should know injury and that it was wrongfully caused)
Witherell v. Weimer, 85 Ill. 2d 146 (1981) (when only one conclusion can be drawn from undisputed facts, accrual is a question for the court)
Nolan v. Johns-Manville Asbestos, 85 Ill. 2d 161 (1981) (once wrongful cause reasonably appears, plaintiff must pursue rights and cannot sleep on them)