Claim Denial and Tolling the Statute of Limitations
In Burress-Taylor v. American Security Insurance Company, fire damaged Ollia Burress-Taylor’s home, and she brought an action for breach of contract, deceptive conduct in violation of the Illinois Consumer Fraud and Deceptive Business Practice Act, and a declaratory judgment against American Security Insurance Company seeking to recover insurance proceeds under her claim. Burress-Taylor’s home was secured by a mortgage from Homecomings Financial, LLC, and she had a force-placed residential insurance policy included in her mortgage. A forced-place insurance policy is a policy procured by the lender. The policy was underwritten by American Security Insurance Company and provided for $124,000 in dwelling coverage. A provision in the policy stated that if there is any other insurance, which would attach if the insurance under this policy had not been effected, it shall apply only as excess and in no event as contributing insurance, and then only after all other insurance has been exhausted. The policy also contained an Illinois Amendatory Endorsement, which stated that no action shall be brought unless there was compliance with the policy provisions and the action is started within one year of the loss. Burress-Taylor was also insured by a policy that she had procured from Hanover Fire Casualty Insurance. Hanover’s policy contained a “Pro Rate Liability” clause. The clause states that Hanover “shall not be liable for a greater proportion of any loss than the amount hereby insured shall bear to the whole insurance covering the property against the peril involved, whether collectible or not.” Hanover issued a check to Burress-Taylor and Homecomings in the amount of $56,854.64 for the fire damage to the dwelling. Homecomings took possession of the Hanover check and disbursed $18,951.55 to Burress-Taylor. The mortgage agreement between her and Homecomings provides that Homecomings has the right to “disburse [insurance] proceeds for the repairs and restoration in a single payment or in a series of progress payments as the work is completed.” Homecomings did not make further disbursements of the Hanover proceeds. Burress-Taylor requested that Hanover disburse more funds it denied, on the basis that the shared liability between Hanover and American Security was in dispute. American Security sent a letter to Burress-Taylor informing her that its policy will not respond until all other insurance has been paid. The letter further explained that Hanover would need to “pay up to $100,000 [under its policy] before [American Security] “would pay” and that the “final due” amount, payable under American Security policy, was $23,709.56 after subtracting the $500 deductible. The $23,709.56 “final due” amount was calculated based on it’s assertion that Hanover was liable for $100,000 in dwelling coverage.
The court addressed whether the letter from the insurer to the insured constituted a denial of the insured’s claim, which would trigger the commencement of the one-year limitation period. The court determined that the letter was not a denial. Nothing in the letter indicated that Burress-Taylor’s claim was denied. American Security was unable to point to language in the letter that could be interpreted as a denial of her claim. At most, the letter informs Burress-Taylor of the status of her claim and the policy’s limits. Section 143.1 of the Insurance Code is an important statutory restriction on contractual time limitation provisions. The purpose of 143.1 is to prevent an insurance company from sitting on a claim, allowing the limitation period to run and depriving the plaintiff of the opportunity to litigate the claim. Here, the insured failed to advise Burress-Taylor, in the letter, of the number of days the limitation period was tolled or how many days remained before her time to file suit expired, as the insured would have been required to do by section 919.80(d)(8)(c) of title 50 of the Administrative Code, upon denial of her claim.
The second issue addressed by the court was whether insured’s consumer fraud claim was preempted. “The relevant inquiry regarding a Consumer Fraud Act claim is whether the alleged conduct implicates consumer protection issues.” To state a claim under the Consumer Fraud Act, a plaintiff must allege: “(1) a deceptive act or practice by the defendant; (2) the defendant’s intent that the plaintiff rely on the deception; and (3) the occurrence of the deception during a course of conduct involving trade or commerce.” A consumer fraud claim may not be based on a breach of a promise contained in the insurance policy. Insurer argues that insured’s consumer fraud claim is preempted by section 155, because it was not separate and independent of her breach of contract claim. The court found her consumer fraud claim separate and independent of her breach of contract claim. Although her consumer fraud claim incorporated by reference and re-alleged the factual basis underlying her claims, it was not based on insured’s breach of contract of the insurance policy. Rather she properly raised the three elements of fraud claim set forth above.
The court held that: (1) letter from insurer to insured did not constitute a denial of insured’s claim, so as to restart tolled limitations period, and (2) insured’s consumer fraud claim was not preempted.
Burress-Taylor v. American Security Insurance Company, 980 N.E.2d 679 (Ill.App. 1 Dist. 2012).
