2017 IL App (3d) 160276
Opinion filed June 14, 2017 _____________________________________________________________________________
IN THE
APPELLATE COURT OF ILLINOIS
THIRD DISTRICT
RVP, LLC, and RIVER VALLEY ) Appeal from the Circuit Court RECYCLING, LLC, ) of the 21st Judicial Circuit, ) Kankakee County, Illinois. Plaintiffs-Appellants, ) ) v. ) ) ADVANTAGE INSURANCE ) Appeal No. 3-16-0276 SERVICES, INC., COMMERCIAL ) Circuit No. 2013-L-000113 INSURANCE GROUP, INC., ) and TOM ROULE, ) Honorable ) Adrienne W. Albrecht, Defendants-Appellees. ) Judge, presiding. _____________________________________________________________________________
JUSTICE CARTER delivered the judgment of the court, with opinion. Justices Lytton and O'Brien concurred in the judgment and opinion. _____________________________________________________________________________
OPINION
¶1 Plaintiffs filed a complaint alleging negligence and breach of contract counts against their
insurance broker agencies, Advantage Insurance Services, Inc. (Advantage) and Commercial
Insurance Group, Inc. (CIG), and their insurance agent, Tom Roule. In the complaint, plaintiffs
alleged defendants were negligent and in breach of contract for failing to procure sufficient
insurance coverage, resulting in plaintiffs being unable to recover insurance proceeds for
property that was destroyed in a fire. The trial court granted defendants’ motion for summary judgment because the plaintiffs’ complaint was filed beyond the applicable two-year statute of
limitations. Plaintiffs appealed, arguing that (1) the trial court erred in finding, as a matter of law,
that plaintiffs knew or should have known the insufficient coverage limits upon their receipt of
the insurance policies; (2) the trial court erred by failing to apply the established rule in
Perelman v. Fisher, 298 Ill. App. 3d 1007 (1998), which provided that where an insured brings a
claim against its insurance broker or insurance agent, a court cannot presume the insured knew or
should have known of the contents of the insurance policy merely because the insured received
that policy; and (3) the trial court erred in finding, as a matter of law, that plaintiffs’ claim that
defendants’ failed to procure sufficient coverage was barred by the statute of limitations. We
affirm the trial court’s grant of summary judgment in favor of defendants.
¶2 FACTS
¶3 Plaintiff, RVP, owned real property at 1244 Grinnell Road and 1246 Grinnell Road, in
Kankakee, Illinois. In 2007, plaintiff, River Valley Recycling, began operating a recycling
facility out of a portion of RVP’s building at 1244 Grinnell Road. Mark Fill was a member of
RVP and the Chief Financial Officer (CFO) of River Valley Recycling. Fill was responsible for
the procurement and for the management of insurance issues for plaintiffs.
¶4 Defendants, Advantage and CIG, were the insurance broker agencies that procured
insurance on behalf of plaintiffs. Defendant, Tom Roule, was an insurance agent employed by
Advantage and, after September 7, 2009, by CIG. In 2007 or early 2008, Fill began to use Roule
to provide insurance broker services for plaintiffs.
¶5 A. Travelers Policy
¶6 On March 1, 2008, Roule procured a policy for RVP from Travelers Casualty Insurance
Company (Travelers policy) for “building[s] 1 and 2,” which were the buildings located at 1244
2 and 1246 Grinnell Road, with coverage limits of $3,000,000 and $600,000, respectively. On
April 21, 2008, a “Change Endorsement” was issued, revising the limits to $1,500,000 for the
1244 building and $1,500,000 for the 1246 building, with blanket limits so that $3,000,000 of
coverage could have applied to either or both of the buildings. Fill could not recall the reason for
change in coverage and had not initiated the process for the change but would have been the
person who authorized the change. On April 1, 2009, the policy was renewed with the limits
increased to $1,545,000 for each building, with blanket coverage also provided. The increase in
coverage was due to Travelers’ standard policy of a three percent increase each following year.
On January 18, 2010, Travelers issued a notice of nonrenewal, indicating that the policy would
not be renewed on its expiration date of April 1, 2010.
¶7 B. Universal Policy
¶8 In July of 2008, River Valley Recycling was issued a commercial insurance policy
through Universal Underwriters Insurance Company (Universal policy) for $1,300,000 of
blanket replacement cost coverage for its equipment and $1,000,000 of coverage for its stock and
inventory. The Universal policy was renewed some time prior to July 1, 2009. On July 1, 2009,
River Valley Recycling was given notice that the Universal policy was being canceled effective
August 1, 2009.
¶9 C. Erie Policies
¶ 10 When the Universal policy was canceled, Fill faxed Roule the canceled policy and asked
Roule to find the same or similar coverage to what plaintiffs had prior to the cancellation. When
Travelers had canceled plaintiffs’ policy, Fill instructed Roule to find the same or similar
coverage as plaintiffs had under the canceled Travelers policy. Roule had a copy of the Travelers
policy so he knew all the information.
3 ¶ 11 In applying for new insurance coverage for business personal property, on July 29, 2009,
Fill executed a five-page Erie insurance application for $75,000 of coverage for plaintiffs’
business personal property. Roule did not send Fill the entire application. Fill executed his
signature on the last page of the application and returned it to Roule. Fill denied seeing the entire
five-page application. It was Fill’s custom to certify insurance applications without seeing all the
pages. Fill did not review the application to determine whether the policy afforded the same or
similar coverage relative to the canceled policies but, instead, relied on Roule to obtain coverage
that he had requested.
¶ 12 On August 1, 2009, Erie issued an insurance policy (Erie property policy) based on Fill’s
application. The declaration page of the Erie property policy specified that the coverage limits
for business personal property was $75,000. The Erie property policy was subsequently renewed
on two occasions—on August 1, 2010, and August 1, 2011—with the declaration page showing
that the coverage limit was $75,000.
¶ 13 In applying for coverage on the buildings, on January 20, 2010, Fill executed an
application for $1,545,000 of insurance coverage for plaintiffs’ 1244 Grinnell property and
$545,000 of coverage for plaintiffs’ 1246 Grinnell property. The policy did not provide blanket
coverage. Fill executed the final page of the application without seeing the amount of coverage
for which he was applying. On February 1, 2010, the Erie policy pertaining to plaintiffs’
buildings (Erie buildings policy) was issued. Erie sent a copy of the policy directly to Fill and
RVP. The policy included a declaration page, indicating coverage limits of $1,545,000 for
plaintiffs’ 1244 Grinnell property and $545,000 for plaintiffs’ 1246 Grinnell property. Fill did
not look at the Erie buildings policy upon his receipt of the policy to ensure that it afforded the
4 same or similar coverage as the canceled policies. The Erie buildings policy was renewed the
following year on February 1, 2011.
¶ 14 D. Plaintiffs’ Losses
¶ 15 On September 2, 2011, a fire occurred on the plaintiffs’ Grinnell properties, destroying
the buildings and the contents therein. Plaintiffs obtained a general contractor’s proposal, which
plaintiffs provided to Erie, to rebuild the 1244 building for $3,010,760. However, Erie only paid
the coverage limit on the 1244 building of $1,545,000. Plaintiffs also obtained a general
contractor’s proposal to replace the 1246 building for $544,608, but Erie only paid the
“functional replacement” cost of $437,800. River Valley Recycling claimed that it sustained
$1,028,977 in loss of business income but was only paid $40,173 for the loss of three pieces of
equipment. In August 2011, the month prior to the fire, River Valley Recycling had made its
final payment on a baler and had received a bill of sale for the baler on or about August 31, 2011.
Erie denied River Valley Recycling’s claim for the baler upon its determination that the baler
was not covered under the terms of the Erie policy. Fill claimed that he did not learn that the
coverage limits provided by the Erie policies did not provide the same or similar coverage as the
canceled Travelers policy until after the fire.
¶ 16 E. Complaint
¶ 17 On August 30, 2013, plaintiffs filed a complaint alleging negligence and breach of
contract counts against defendants for failing to obtain the amount of coverage Fill had
requested. In their complaint, under the negligence count, plaintiffs alleged that defendants
breached their common law and statutory duty of care to exercise ordinary care and skill in
renewing, procuring, binding, and placing the coverage as requested by the plaintiffs in that
defendants failed to procure and/or renew insurance policies with sufficient coverage; failed to
5 advise plaintiffs that the new insurance policies did not provide sufficient coverage to protect
against the loss of the Grinnell facilities, fixtures, permanent equipment and machinery, other
equipment, supplies, tools, and inventory; and failed to inform plaintiffs of the necessary
coverage to protect their assets and interests.
¶ 18 Under the breach of contract count, plaintiffs alleged that on or before February 1, 2010,
RVP had engaged the services of Roule to procure insurance coverage to replace the coverage
that was being canceled by Travelers and Universal in order to procure full coverage for
plaintiffs’ buildings, fixtures, machinery, equipment, supplies, tools, and inventory. Plaintiffs
further alleged that, after the fire, they learned that their insurance coverage was not sufficient to
cover the loss of the Grinnell facilities, fixtures, permanently attached machinery and equipment,
other equipment, supplies, tools, and inventory and alleged that defendants had “breached their
contract to procure sufficient insurance for the [p]laintiffs.”
¶ 19 F. Motion to Dismiss
¶ 20 In response, defendants filed a motion to dismiss pursuant to section 2-619(a)(5) of the
Code of Civil Procedure (Code). 735 ILCS 5/2-619(a)(5) (West 2012) (the action was not
commenced within the time limited by law). In the motion, defendants argued that the complaint
was filed beyond the two-year statute of limitations period for actions against insurance
producers as specified under section 13-214.4 of the Code. 735 ILCS 5/13-214.4 (West 2012).
The trial court denied the motion to dismiss, finding that the facts pled in the complaint did not
specify when the plaintiffs had received copies of the policies to establish the date that the cause
of action had accrued.
6 ¶ 21 E. Motion for Summary Judgment
¶ 22 Through discovery, it was determined that the Erie policies were delivered directly to Fill
at the RVP/River Valley Recycling offices, but Fill was unsure of the exact date that he received
the policies. Fill acknowledged that he received the policies some time prior to the policies’
renewal dates, which indicated he received a copy of the Erie buildings policy no later than
January 31, 2011, and a copy of the Erie property policy no later than July 31, 2010.
¶ 23 Defendants filed a motion for summary judgment, arguing that plaintiffs brought their
complaint beyond the two-year statute of limitations for actions against insurance producers. The
trial court granted the motion for summary judgment, finding that the plaintiffs knew or should
have known of the policy limits and whether those limits contained sufficient coverage when
plaintiffs received the policies. Plaintiffs appealed.
¶ 24 ANALYSIS
¶ 25 On appeal, plaintiffs argue the trial court erred in granting defendants’ summary
judgment on the basis that plaintiffs’ claims were time-barred. Specifically, plaintiffs argue the
trial court erred (1) in finding that plaintiffs knew or should have known of the insufficient
coverage limits upon receipt of the insurance policies, as a matter of law; (2) by failing to apply
the established rule in Perelman v. Fisher, 298 Ill. App. 3d 1007 (1998), which provides that
where an insured brings a claim against its insurance broker, a court cannot presume the insured
knew or should have known of the contents of the insurance policy merely because the insured
received that policy; and (3) in finding that plaintiffs’ claim regarding defendants’ failure to
procure sufficient coverage was barred by the statute of limitations, as a matter of law.
¶ 26 An appeal following a grant of summary judgment is subject to a de novo review.
Seymour v. Collins, 2015 IL 118432, ¶ 42. Summary judgment is appropriate when there are no
7 genuine issues of material fact and the moving party would be entitled to judgment as a matter of
law. Id. Where reasonable persons could draw divergent inferences from undisputed facts,
summary judgment should be denied. Id.
¶ 27 I. Plaintiffs’ Knowledge of the Coverage Limits
¶ 28 Plaintiffs argue that the trial court erred in granting summary judgment to defendants
where the trial court held that plaintiffs’ claims were untimely as a matter of law because
plaintiffs knew or should have known of the policies’ lower coverage limits upon receipt of the
policies. Plaintiffs contend that it is “well settled” under Illinois law that a claim arising out of a
contractual relationship ordinarily accrues at the time of the breach and the accrual may be tolled
by the “discovery rule.” Defendants argue the trial court’s ruling that the complaint was time-
barred should be affirmed.
¶ 29 The two-year statute of limitations set forth in section 13-214.4 of the Code governs the
plaintiffs’ claims regarding defendants’ negligent procurement and breach of contract in this
case. 735 ILCS 5/13-214.4 (West 2012). Section 13-214.4 provides that all causes of action by
an insured against his insurance producer, registered firm, or limited insurance representative
concerning the sale, placement, procurement, renewal cancellation of, or failure to procure any
policy of insurance shall be brought within two years of the date the cause of action accrues. Id;
Scottsdale Insurance Co. v. Lakeside Community Committee, 2016 IL App (1st) 141845, ¶ 20.
¶ 30 Under the discovery rule, the limitations period does not begin to run until the plaintiff
knows or reasonably should have known of its injury and that it was wrongly caused. Knox
College v. Celotex Corp., 88 Ill. 2d 407, 414 (1981). At the point the injured person knows or
should have known that his or her injury was “wrongly caused,” the injured person possesses
sufficient information concerning his injury and the cause of his injury to put a reasonable person
8 on notice to make additional inquiries. Id. at 415; Scottsdale, 2016 IL App (1st) 141845, ¶ 24.
Generally, a cause of action against an insurance agent accrues under section 13-214.4 when
coverage is denied, but is extended by the discovery rule to accrue at the time the plaintiff learns
of the denial of coverage if he or she was not immediately aware of it. Scottsdale, 2016 IL App
(1st) 141845, ¶ 31. When a party should be charged with knowledge of his or her injury and that
it was wrongfully caused is generally a question of fact, though judgment may be entered as a
matter of law when the undisputed facts lead to only one conclusion. Id. ¶ 26.
¶ 31 In this case, plaintiffs contend that they did not become aware of the lower coverage
limits until after the fire on September 2, 2011, and argue their claim was timely because it was
filed on August 30, 2013, within the two years of that time. Plaintiffs further argue that the trial
court’s presumption that they were aware of the coverage limits was erroneous as a matter of law
because there was no evidence of their “actual knowledge” of the substantially lower coverage
limits. In response, defendants argue that the cause of action accrued once the plaintiffs received
the policies, at which time they knew or should have known of the policies’ shortcomings
pertaining to the coverage limits.
¶ 32 Here, plaintiffs applied for and received $1,545,000 and $545,000 of coverage on the two
buildings and $75,000 of coverage for business property. Plaintiffs received copies of the
policies reflecting those coverage limits. Under this scenario, at the time plaintiffs received the
policies, they should have been aware that they would not be extended any higher coverage than
that of the policy coverage limits for which they had applied. Although plaintiffs argue there was
no evidence of their actual knowledge of the policy limits, they should have reasonably known of
the policy limits upon receiving the policies or the renewals of the policies, both of which
indicated the coverage limits. See Celotex, 88 Ill. 2d at 414.
9 ¶ 33 II. Failure to Read Policy
¶ 34 Next on appeal, plaintiffs argue that under the “clear legal rule” set forth in Perelman,
298 Ill. App. 3d at 1012-13, Economy Fire & Casualty Co. v. Bassett, 170 Ill. App. 3d 765
(1988), Black v. Illinois Fair Plan Ass’n, 87 Ill. App. 3d 1106 (1980), and Babiarz v. Stearns,
2016 IL App (1st) 150988, the trial court could not, as a matter of law, presume that plaintiffs
knew or should have known of the contents of the Erie policies upon plaintiffs’ receipt of the
policies. Citing Perelman, plaintiffs argue that an insured’s duty to know the content of its policy
should be tested in light of the fiduciary relationship existing between the insured and his agent.
Plaintiffs contend that the question of when they knew or should have known of the insufficient
coverage limits, so as to trigger the time that their claims against defendant had “accrued,” is a
disputed issue of material fact that cannot be determined as a matter of law. Plaintiffs contend
that the trial court erred by failing to apply the established rule, as set forth in Perelman, that an
insured’s failure to read and understand the terms of a policy is not an absolute bar to recovery.
¶ 35 In Perelman, an insured sued its insurance broker for breach of duty and negligent
misrepresentation after the broker procured a disability policy that did not provide for cost-of-
living increases when the agent had indicated that plaintiff was getting the “best” policy and the
policy would have an inflation provision. Perelman, 298 Ill. App. 3d 1007. When the insured
received the policy, the insured “skimmed” it and observed references to benefit adjustments
related to the “consumer price index.” Id. at 1009. Defendants filed a motion to dismiss the
complaint as barred by statute of limitations where the complaint had been filed seven years after
plaintiff received the policy. Id. at 1009-10. The trial court granted the motion to dismiss. Id. at
1010. On appeal in Perelman, the appellate court noted that when an insured sues the insurer for
a discrepancy between the policy issued and the policy requested, the insured will be bound by
10 the contract terms because he or she is under a duty to read the policy and inform the insurer of
any discrepancy. Id. at 1011 (citing Black, 87 Ill. App. 3d at 1110; Foster v. Crum & Forster
Insurance Cos., 36 Ill. App. 3d 595 (1976); Furtak v. Moffett, 284 Ill. App. 3d 255 (1996)).
However, the appellate court further noted a distinction between an action against an insurer who
issues the policy and an action against the agent who procures the policy because the agent or
broker procuring the policy has a fiduciary duty and is responsible for any loss if there is a
breach of that duty. Perelman, 298 Ill. App. 3d at 1011-12. The Perelman court held that an
insured’s failure to read and understand the terms of a policy that had been procured by a broker
is not an absolute bar to the insured’s right to recover against the broker for the broker’s breach
of a fiduciary duty. Id. at 1013. The Perelman court found that the trial court erred in dismissing
the plaintiff’s complaint as untimely because a genuine issue of material fact existed as to when
the plaintiff should have known of the alleged deficiency in the insurance policy, which could
not be answered until the trier of fact determined whether the plaintiff should have known of the
deficiency upon receiving the policy or whether the policy’s reference to the “consumer price
index” could have reasonably been interpreted as providing an inflation increase provision so
that plaintiff would not have been aware of the deficiency until the denial of a claim. Perelman,
298 Ill. App. 3d at 1013.
¶ 36 In this case, the trial court initially denied the defendants’ motion to dismiss, finding
there was a question of fact as to when plaintiffs had received the policies. Thereafter, during
discovery, it was determined that plaintiffs received the policies prior to the policies’ renewal
periods, and the complaint was filed two years after that time. The evidence also showed that the
policies indicated the coverage limits on the declaration pages and there was no indication or
11 allegations that the amounts of the coverage limits were ambiguous. As such, plaintiffs should
have known of the policy limits upon receiving the policies.
¶ 37 We do not reach the issue of whether plaintiffs’ failure to read the policy was an absolute
bar to recovery or was merely some evidence of contributory negligence because we do not
reach the merits of this case. See Perelman, 298 Ill. App. 3d at 1013 (finding “that the trial court
erred in holding as a matter of law that plaintiff had a duty to “ ‘realize what’s in the policy and
what is not’ regardless of ‘whether [plaintiff] is suing the broker or the insurance company’ ”).
Instead, for statute of limitations purposes, we must determine when the plaintiffs should be
charged with knowledge of the deficient coverage limits. Based upon the facts of this case,
plaintiffs should have known of the deficient coverage limits upon receiving the policies where
there was no claim of an ambiguity in the declaration of the coverage limits.
¶ 38 III. Claim Barred by the Statute of Limitation
¶ 39 Finally on appeal, plaintiffs argue the trial court’s holding that plaintiffs’ claims
regarding defendants’ failure to procure sufficient coverage were barred by the statute of
limitations was erroneous as a matter of law. Plaintiffs argue they were not aware that the Erie
polices had substantially lower coverage limits than the plaintiffs had directed defendants to
procure until after the fire on September 2, 2011, and that under the “discovery rule,” their
claims were timely. Plaintiffs argue that there was a genuine issue of material fact of whether the
plaintiffs knew or should have known of the policies’ limits upon receiving the policies or at the
time they claimed to have learned of the policies’ limits after the fire, so as to preclude a
summary judgment.
¶ 40 As discussed above, where the plaintiffs applied for certain policy coverage limits,
received a policy reflecting those coverage limits, and renewed that policy multiple times, we
12 hold that the insured should have known of the coverage limits upon receipt of the policies,
which included declaration pages that specified the coverage limits. See Babiarz, 2016 IL App
(1st) 150988, ¶ 43 (plaintiffs have an affirmative duty to review the terms of the new policy
issued to them); Perelman, 298 Ill. App. 3d at 1011 (an insured is not excused from knowing the
contents of an insurance policy where there are no allegations that it was ambiguous). Plaintiffs
argue that their failure to read the policies would not have precluded their claims as a matter of
law because a fiduciary relationship existed between them and defendants. See Perelman, 298
Ill. App. 3d at 1011-12 (where a fiduciary relationship exists, failure to read an insurance policy
does not prevent a claim as a matter of law). As discussed above, the defendants’ fiduciary duty
and the issue of whether a party was negligent or contributory negligent go to the merits of
plaintiffs’ claims. However, for the purpose of determining when the plaintiffs’ claims accrued,
we find plaintiffs knew or should have known of the coverage limits upon receiving the policies.
Thus, we affirm the trial court’s grant of summary judgment in favor of defendants.
¶ 41 CONCLUSION
¶ 42 The judgment of the circuit court of Kankakee County is affirmed.
¶ 43 Affirmed.