Insurance Company Representative’s Duty to Inform Insured about Changes in Renewal Policy
In Fuller v. Liberty Mutual Fire Insurance Co., in August of 2007, Mark and Sarah Fuller’s (“Fullers”) sump pump in their house failed and caused flooding in the basement, which caused about $50,000 in damage. The Fullers had an insurance policy on the home with Liberty Mutual Fire Insurance (“Liberty”), but the policy did not include an optional endorsement that would have covered water back-up damage. The Fullers sued Liberty under Section 2 of the Consumer Fraud and Deceptive Business Practices.
When the Fullers bought their home insurance policy from Liberty in 2000, as part of the application, the Fullers were given options to purchase several different types of additional coverage in addition to the basic policy. One of these additional coverages was “water back-up coverage,” which can be bought and added on to the basic policy for an additional premium. The Fullers specifically declined, the insurance went into effect on September 2000, and the Fullers renewed the policy for the next seven years. In 2004, the Fullers tore down their existing home and built a new home on the same site. About a year later, Sarah Fuller called Liberty and spoke to one of Liberty’s representatives. She told him about the new structure and informed him that the new home had a basement, asking for full coverage of the home based on the description. She was not asked to fill out a new application, nor was she sent a new policy. Sarah apparently never received a specific response to her request. The only documented interactions between the parties after the summer of 2005 were renewal declarations for the policy that defendant sent to plaintiff in 2005 and 2006, neither of which mentioned water back-up coverage.
The court addressed the question of whether awarding the Fullers merely $9,000 in damages is against the manifest weight of evidence. A judgment is against the manifest weight of evidence only when the opposite conclusion is apparent or when the findings appear to be unreasonable, arbitrary or not based on evidence. In order to prevail on a Section 2 Consumer Fraud Claim, a plaintiff must prove: (1) a deceptive act or practice by the defendant; (2) defendant’s intent that plaintiff rely on the deception; and (3) that the deception occurred in the course of conduct involving trade and commerce. Additionally, the plaintiff must prove that the fraud proximately caused the plaintiff’s injury.
Under the Fullers’ theory, when Sarah Fuller talked to the Liberty representative in the summer of 2005 and requested full coverage for the new house, Liberty deceptively responded with only an unclear declaration that did not explain to the Fullers that water back-up coverage was not included under their policy. Sarah Fuller testified at trial that she spoke to Wayne Rempala, a Liberty representative. Rempala testified that he never spoke to Sarah Fuller. When witnesses give contradictory testimony in a bench trial, we “will not disturb the trial court’s factual findings based on that testimony unless a contrary finding is clearly apparent.” However, there is a crucial factor that the trial court overlooked. The record is clear that the Fullers’ residence was covered under the same policy from 2000, when they initially filled out the application and declined to purchase additional water-back up coverage, to 2007 when the incident occurred. The central contention underlying the Fullers’ claim is that they were unaware their policy did not include water back-up coverage and that Liberty allowed them to believe the policy covered all potential damage to the newly constructed home. The problem with this theory is the general rule, in Illinois, that the insured bears the burden of knowing the contents of insurance policies and has an affirmative duty to bring any discrepancies in the policy to the attention of the insurer. Further, the law does not impose a duty on the insurer to review the adequacy of an insured’s coverage. When the premiums become due, the insured has the option of accepting, rejecting, or requesting a modification of the terms of the policy. Though, an insurer does have a duty to inform an insured about changes in a renewal policy that has been modified. This duty is now codified in the Illinois Insurance Code.
The court found that the evidence demonstrated the Fullers specifically declined water back-up coverage when they applied for their original policy and that the same policy remained in effect from 2000 until the incident. The record is also clear that the Fullers were informed via written declaration of all changes to the policy, including renewals. In light of Fullers’ own legal duty to know that contents of their policy, and lack of evidence that Liberty either misrepresented the policy when it was sold or failed to inform Fullers of changes to the policy, Liberty cannot be liable for consumer fraud under Section 2.
Fuller v. Liberty Mutual Fire Insurance Co., 2013 WL 5234266 (Ill. App. 1 Dist.).
