Discovery Rule Applied to Claim Against Broker for Failure to Procure Excess Coverage

The Illinois Appellate Court for the First District, in an opinion written by Justice McBride with Justices Howse and Cobbs concurring, applying Illinois law, upheld a jury verdict that awarded Cook County $9.05 million in damages. The Appellate Court upheld the jury verdict finding that the statute of limitations had not lapsed on the County’s claim against its broker because the discovery rule applied. However, the Appellate Court also denied the County’s request for additur of $32 million or a new trial on special damages.

Cook County had to pay $45 million of a $55 million settlement verdict in a class-action lawsuit after its excess insurer denied coverage.  As a result, Cook County sued its broker, USI Insurance Services Corp of Illinois, Inc. (“USI”), for breach of contract. The claim stemmed from USI’s failure to procure excess liability coverage for the County for the relevant time period despite USI’s agreement with the County to do so. The breach of contract claim went before a jury, and the jury awarded the County $9.05 million in damages. Both parties appealed. USI appealed the denial of its motion for JNOV, arguing, inter alia, that the County’s claim was barred by the statute of limitations.  The County appealed the denial of its motion for JNOV, which sought an additional $20 million in damages or, in the alternative, a new trial on special damages.

In response to USI’s statute of limitations argument, the Appellate Court explained that the case fell within the exception envisioned by the Illinois Supreme Court in American Family Mutual Insurance Co. v. Krop, 2018 IL 122556. This exception applies when a “policyholder reasonably could not be expected to learn the extent of coverage simply by reading the policy.” Applying the discovery rule, the statute of limitations did not begin until the County received its denial of coverage, and therefore, the action was not time-barred.

The Appellate Court also rejected the County’s arguments for entry of additur for $32 million in special damages. Additur is not available in circumstances “where the jury has made credibility determinations based on conflicting testimony,” which is precisely what the jury did in the case at hand. Additionally, the Appellate Court refused to grant a new trial on special damages because “the questions of damages and liability [were not] so separate and distinct that a trial limited to the question of damages [would not be] unfair to the defendant[.]” Cnty. Of Cook v. USI Ins. Servs. Corp. of Ill., Inc., 2020 IL App (1^st) 181889-U (June 30, 2020).