The Illinois Supreme Court just made it much harder for Illinois customers to sue their insurance agents. In 2012, Walter and Lisa Krop asked their insurance agent, Andrew Varga, to provide them with a new homeowner’s insurance policy with coverage equal to their existing policy. Varga obtained a new policy, but neglected to provide the Krops with the same level of coverage. Nevertheless, the Krops renewed their deficient policy with Varga three more times. It was only after their son was sued and their new insurer declined coverage that the Krops first discovered that they did not have the insurance they wanted. It turns out they never read their insurance policy.
Insurance Policy Lawsuit
The Krops sued Varga for negligence, claiming that he failed to act with ordinary care in obtaining the correct amount of insurance for the Krops. Varga moved to dismiss the Krops’ complaint, claiming that he was protected by a two-year statute of limitations on claims brought against insurance agents. According to Varga, because he obtained the wrong policy for the Krops in 2012, their claim against him was time barred by the time the Krops sued him in 2015.
Supreme Court Decision
The case made its way to the Illinois Supreme Court, which ultimately agreed with Varga, concluding that the Krops should have known their policy was defective in 2012 (and when it was renewed 2013 and 2014). The fact that they did not bother to read the policy was no defense. Thus, when they sued Varga in September 2015 for his failures in March of 2012, they were too late.
The effect of the Supreme Court’s decision is twofold. First, it provides insurance agents with the certainty of knowing that any chance of liability will be extinguished two years after they sell (or fail to sell) a policy. Second, it places a greater burden on insureds to actually read their policies and understand their terms, thereby incentivizing them “to act in good faith to purchase the policy they actually want, rather than to delay raising an issue until after the insurer has already denied coverage.” The moral of the story, at least from the insured’s perspective, is to read your insurance policy!
Matthew D. Elster, Partner