Smith v. American Heartland Insurance Co.
2017 IL App (1st) 161144
| Ill. App. Ct. | 2017Background
- On March 1, 2010, Nancy Smith was a passenger in a vehicle involved in a hit-and-run; the driver who fled was unidentified. The insured (Octavia Pearson) had a split policy: American Freedom (collision) and American Heartland Insurance Co. (liability and uninsured motorist).
- At the scene police prepared a report listing the broker (Insure On The Spot); the insured only had an insurance card listing both carriers but not which carrier covered which part.
- Smith treated for injuries, retained counsel, and initially sent notices to American Freedom; Heartland was notified by counsel by phone on July 9, 2010, and received a written letter from Smith’s counsel on September 9, 2010.
- Heartland denied coverage on February 11, 2011, asserting Smith failed to provide written notice within the policy’s 120‑day hit-and-run requirement; Smith sued for declaratory relief and summary judgment followed by a bench trial.
- The trial court found the 120‑day notice clause unenforceable as applied, applied Country Mutual reasonableness factors, and entered judgment for Smith. The appellate court affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether appellate court may review denial of Heartland’s summary-judgment motion | Smith: Heartland failed to appeal that order specifically; denial merged into final judgment | Heartland: denial was erroneous because Smith missed the 120‑day written notice | Court: No jurisdiction to review denial (notice didn’t specify it) and, in any event, denial merged into the final judgment after trial; proceeding to trial was proper |
| Whether the 120‑day written notice clause is ambiguous and whether Country Mutual factors apply | Smith: clause should be treated as unenforceable / notice reasonableness governs | Heartland: clause is unambiguous and enforceable; Country Mutual inapplicable | Court: Clause is unambiguous but Country Mutual reasonableness factors are appropriate guidelines when assessing whether a notice clause violates public policy |
| Whether the 120‑day notice term violates Illinois public policy as applied to an innocent third-party claimant | Smith: Strict enforcement would subvert UM statutory purpose and unfairly bar an innocent passenger who lacked carrier info | Heartland: Short notice periods are valid to prevent fraud and enable timely investigations/inspections | Court: Enforcement here would thwart the uninsured-motorist statute and public policy; clause unenforceable as applied to Smith |
| Whether Smith’s notice was reasonable/timely under the circumstances | Smith: Notice to Heartland (phone July 9, 2010; letter Sept. 9, 2010) was reasonable given broker situation and split policy | Heartland: Written notice came after 120 days and was untimely | Court: Applying reasonableness factors to the facts, notice was reasonable and Smith prevailed |
Key Cases Cited
- Country Mutual Insurance Co. v. Livorsi Marine, Inc., 222 Ill. 2d 303 (2006) (establishes reasonableness factors for ambiguous notice provisions)
- Severs v. Country Mutual Insurance Co., 89 Ill. 2d 515 (1982) (insurer cannot use policy terms to circumvent uninsured-motorist statute)
- Phoenix Insurance Co. v. Rosen, 242 Ill. 2d 48 (2011) (test for when an insurance provision violates public policy)
- General Motors Corp. v. Pappas, 242 Ill. 2d 163 (2011) (notice of appeal must identify judgment or order appealed to confer jurisdiction)
- Hartford Accident & Indemnity Co. v. LeJeune, 114 Ill. 2d 54 (1986) (ambiguities in uninsured motorist policy construed in favor of insured)