IL App 1st / Broker Liabilityshoke2013
SOL Tolled Until Discovery Due to Broker Misrepresentations
The Illinois Appellate Court for the First District, in an opinion written by Justice Walker, applying Illinois law, reversed the trial court’s dismissal of an insured’s, 2837-55 Irving Park, LLC (“Irving Park”), complaint as untimely, holding instead that Irving Park’s complaint adequately stated facts bringing it within the time allowed by the statute of limitations. The Appellate Court stated that the policy presented a question for the trier of fact as to whether a reasonable customer would understand the terms of the policy, despite assurances from the insurance broker to the contrary.
The dispute stems from a claim for coverage of damages arising from a fire at a property owned by Irving Park, which was denied by its insurer, Selective Insurance Company of America (“Selective”), on the grounds that the policy did not cover lost business income. Irving Park then sued its insurance brokers for negligence, negligent misrepresentation, and a violation of the Illinois Consumer Fraud and Deceptive Business Practices Act because, at the time Irving Park purchased the Selective policy, the insurance broker assured Irving Park that there were no changes in the new policy and that it would have the same coverages, including the Business Income and Extra Expense Endorsement, as previous property insurance policies provided to Irving Park.
Though Illinois law typically places a duty upon insureds to read the policy, a narrow exception to that duty exists where the policyholder reasonably could not be expected to learn the extent of coverage simply by reading the policy. Should that exception apply in this case, the discovery rule would toll the statute of limitations to a later date than when Irving Park received the policy, such that Irving Park would have timely filed its complaint.
The Selective policy in effect at the time of the fire was 120 pages long, with several pages of special exclusions and inclusions, as well as multiple references to coverage for lost business income. The Appellate Court held that, along with the insurance broker’s assurances that the policy covered lost business income, the complexity and length of the policy presented a question of fact as to whether a reasonable customer would understand that, contrary to the broker’s assertions, the policy did not provide coverage for lost business income.
As a result, the Appellate Court found that, based on its initial complaint, Irving Park could plausibly show that its reliance on the broker fell within the narrow exception to the duty to read the policy. Therefore, the Appellate Court reversed the trial court’s dismissal of Irving Park’s complaint. 2837-55 Irving Park, L.L.C. v. Total Insurance Services, Inc., 2021 IL App (1st) 200655-U (Sept. 7, 2021).