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Smith v. American Heartland Insurance Co.

Court of Appeals of Illinois, First District

February 6, 2017

NANCY SMITH, Plaintiff and Counterdefendant-Appellee,
AMERICAN HEARTLAND INSURANCE COMPANY, and OCTAVIA PEARSON, Defendants and Counterplaintiffs-Appellants.

         Appeal from the Circuit Court of Cook County.No. 11 CH 10715 Honorable Kathleen M. Pantle, Judge Presiding.

         JUSTICE HARRIS delivered the judgment of the court, with opinion. Presiding Justice Connors and Justice Mikva concurred in judgment and opinion.



         ¶ 1 This is an appeal regarding insurance coverage and the notice clause of an uninsured motorist provision contained within the policy. Plaintiff and counterdefendant-appellee, Nancy Smith (hereinafter "Smith"), was a passenger in an automobile involved in a hit-and-run accident where the other vehicle could not be identified because it fled the scene. The owner of the vehicle Smith rode in had a split insurance policy. One company insured the collision portion, and defendant/counterplaintiff-appellant, American Heartland Insurance Company (hereinafter "Heartland"), insured the liability portion. Heartland denied her claim based on the failure to comply with the notification requirement found in the hit-and-run coverage, and Smith filed this declaratory judgment action.

         ¶ 2 After conducting discovery, both parties moved for summary judgment. Heartland argued it was undisputed that Smith failed to provide written notification of her claim within 120 days of the accident as required by the policy. In her motion for summary judgment, Smith argued her notice was reasonable under the circumstances and, alternatively, the notice provision violated the public policy of Illinois. The circuit court denied both motions after concluding there were genuine issues of material fact that needed to be resolved and proceeded to trial. After trial, the court concluded that it could not enforce the 120-day provision because it "may" violate the public policy of Illinois. The circuit court concluded that the standard to be applied was whether notice was reasonable. Based on the testimony and evidence before it, the court entered judgment for Smith, finding her notice to be reasonable.

         ¶ 3 On appeal, Heartland argues that (1) the circuit court erred in denying its motion for summary judgment; (2) the circuit court erred in finding the 120-day notice provision ambiguous and applying reasonableness factors to find notice timely; and (3) the notice provision does not violate the public policy of Illinois. For the reasons set forth below, we affirm the circuit court in denying summary judgment and proceeding to trial. We find that the notice provision is not ambiguous; however, despite this, we conclude the reasonableness factors found in Country Mutual Insurance Co. v. Livorsi Marine, Inc., 222 Ill.2d 303, 313 (2006), represent suitable guidelines in determining whether a notice provision violates public policy. We conclude that, when applied to the facts and circumstances of this case, the notice provision violates the public policy of Illinois regarding uninsured motorist benefits. Accordingly, we affirm the entry of judgment in favor of Smith.

         ¶ 4 JURISDICTION

         ¶ 5 On March 25, 2016, the circuit court entered a final judgment in favor of Nancy Smith, and against American Heartland Insurance and Octavia Pearson. On April 22, 2016, defendants filed their notice of appeal. Accordingly, this court has jurisdiction over this matter pursuant to Article VI, Section 6 of the Illinois Constitution, and Illinois Supreme Court Rules 301 and 303. Ill. Const. 1970, art. VI, § 6; Ill. S.Ct. R. 301 (eff. Feb. 1, 1994); Ill. S.Ct. R. 303 (eff. May 30, 2008).

         ¶ 6 BACKGROUND

         ¶ 7 On March 1, 2010, Octavia Pearson (hereinafter "the insured") was driving her car with Smith and Derrick Rodgers as passengers when it was struck by a hit and run driver in Chicago, Illinois. The insured obtained her insurance policy through an insurance broker doing business as "Insure On The Spot." The insurance provided to her was in the form of a split policy with two insurance companies providing different coverage. American Freedom Insurance Company provided comprehensive/collision coverage, while Heartland provided liability coverage and the uninsured motorist coverage at issue in this case. At the time of the accident, the insured had not received any insurance policy and only had her insurance card from Insure On The Spot.

         ¶ 8 At the scene of the collision, the insured called the police, who arrived shortly thereafter and prepared a police report of the incident. The police report listed the insured's insurance company as Insure On The Spot. Following her interaction with the police, the insured called Insure On The Spot. The insurance card the insured possessed displayed both insurance companies but did not state which insurance company issued the comprehensive/collision coverage or the liability/uninsured motorist coverage.

         ¶ 9 On March 2, 2010, Smith went to a hospital emergency room and initiated treatment for injuries she alleged were caused by the March 1, 2010 accident. Thereafter, Smith retained the services of attorneys, and based on the information Smith alleged she obtained from the insured, her attorney sent an Attorney's Lien and Notice to American Freedom Insurance Company on March 8, 2010. Receiving no response, on June 29, 2010, a second notice was sent to American Freedom. On July 9, 2010, Smith's attorney was notified by American Freedom that it carried only comprehensive/collision on the insured's vehicle and liability coverage was written by Heartland.

         ¶ 10 On July 9, 2010, Smith's counsel, Barry Weiss, reported by telephone to Heartland that Smith claimed she was injured in the March 1 accident. The insured gave a telephone statement to Heartland on July 16, 2010 that a hit and run accident had occurred. On September 9, 2010, Smith's attorney sent a letter to Heartland, informing it of Smith's uninsured motorist claim. In a letter dated September 14, 2010, Juliette Driscoll, a claims adjuster for Heartland, requested that Smith's counsel provide Heartland with Smith's medical damages.

         ¶ 11 On February 11, 2011, Heartland sent Smith's attorney a letter, denying her uninsured motorist claim, because the written notice of her claim was not sent within 120 days of the incident as stated in the insured's policy. After receipt of the denial, Smith filed this declaratory judgment action against Heartland and the insured, seeking an order that Heartland was obligated to cover her claim. The parties then conducted discovery, and each party eventually filed motions for summary judgment. On March ...

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