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American Family Mutual Insurance Co. v. Krop

Court of Appeals of Illinois, First District, Third Division

May 10, 2017

AMERICAN FAMILY MUTUAL INSURANCE COMPANY, Plaintiff-Counterdefendant-Appellee,
v.
WALTER KROP, individually and as father and next friend of T.K., a minor; LISA KROP and MARY ANDRELOAS, as next best friend of A. A., a minor; Defendants-Counterplaintiffs-Third-Party Defendants-Appellants, Andy Vargas, Third-Party Defendant-Appellee.

         Appeal from the Circuit Court of Cook County No. 14 CH 17305 Honorable Neil Cohen, Judge Presiding.

          JUSTICE COBBS delivered the judgment of the court, with opinion, Presiding Justice Fitzgerald Smith and Justice Lavin concurred in the judgment and opinion.

          OPINION

          COBBS, JUSTICE

         ¶ 1 Plaintiff American Family Mutual Insurance Company (American Family) brought a complaint for declaratory judgment against Walter Krop and Lisa Krop (collectively, the Krops) seeking a declaration that the Krops were not entitled to coverage or protection under its home insurance policy procured in 2012. In response, the Krops brought a counterclaim against American Family and a third-party complaint against American Family agent Andy Vargas. Both American Family and Vargas moved to dismiss the counterclaim and third-party complaint pursuant to sections 2-615 and 2-619 of the Illinois Code of Civil Procedure (the Code). 735 ILCS 5/2-615, 2-619 (West 2014). The trial court granted their motions pursuant to section 2-619 and made no ruling as to section 2-615. For the reasons that follow, we reverse and remand.

         ¶ 2 I. BACKGROUND

         ¶ 3 This appeal arises from the dismissal of defendants' counterclaim and third-party complaint. Before considering the issues raised on appeal, we first set out the relevant facts as alleged in the counterclaim and third-party complaint.

         ¶ 4 In March 2012, Walter and Lisa Krop met with Vargas, an American Family sales agent, regarding their homeowner's insurance. At that time, the Krops were insured through Travelers Insurance Company. The Travelers policy provided coverage for certain intentional acts, bodily injury, property damage, and personal injury. Under the Travelers policy, personal injury included libel, slander, defamation of character, and invasion of privacy. The Krops expressed to Vargas that they wanted an insurance policy with equivalent coverage to the Travelers policy. The Krops alleged Vargas stated that American Family could provide equivalent coverage at a lower or comparable rate.

         ¶ 5 American Family issued its homeowner's policy to the Krops on March 21, 2012. The American Family policy includes coverage for bodily injury and property damage. The policy does not provide coverage for personal injury, injury resulting from intentional acts, or abuse. After receiving the policy in 2012, the Krops did not complain about the limits of coverage and subsequently renewed the policy in 2013, 2014, and again in 2015.

         ¶ 6 On May 14, 2014, the Krops' son, T.K., was sued by Mary Andreloas, as next best friend of A.A., a minor, in the circuit court of Cook County. The Andreloas complaint sought damages for defamation, invasion of privacy, and intentional infliction of emotional distress as the result of alleged harassment and bullying by minor defendants including T.K. The Krops made a claim for coverage under the American Family policy. Their request was denied on August 20, 2014.

         ¶ 7 In the six-page denial letter sent to the Krops, American Family restated the limitations of the Krops' policy, specifically, citing the policy's definition of "bodily harm, " which did not include "emotional or mental distress, mental anguish, mental injury, or any similar injury unless it arises out of actual bodily harm to the person" and the exclusion of coverage for damages or injury resulting from abuse or intentional conduct. American Family also stated that the facts that gave rise to the complaint occurred in 2011, thus predating the Krops' policy.[1]

         ¶ 8 On October 30, 2014, American Family filed a complaint seeking a declaratory judgment regarding coverage for the Krops under the homeowner's insurance policy. Specifically, American Family sought a declaration that the allegations in the Andreloas complaint fell within the exclusions of the Krops' insurance policy, thus requiring no coverage or protection.

         ¶ 9 The Krops filed a counterclaim against American Family and a third-party complaint against Vargas on September 22, 2015. The Krops alleged that Vargas, as an agent of American Family, negligently failed to procure the level of insurance coverage they requested. Subsequently, both American Family and Vargas filed motions to dismiss alleging that the Krops' claims were filed after the two-year statute of limitations for actions against insurers and thus barred. On February 4, 2016, the trial court granted American Family's and Vargas's motions, finding that the Krops' counterclaim and third-party complaint were filed outside of the two-year statute of limitations.

         ¶ 10 II. ANALYSIS

         ¶ 11 On appeal, the Krops argue that both their counterclaim and third-party complaint are timely because the discovery rule tolled the statute of limitations. Specifically, the Krops argue the statute of limitations did not start to run until they were denied coverage in August 2014. In its response, American Family asserts that the Krops' claims were untimely because the statute of limitations began to run once the Krops received the policy in 2012. American Family further argues that the discovery rule is inapplicable to the Krops' claims because they had a duty to read their policy. Vargas filed a separate response ...


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