Insurer does not Waive Contractual Limitation Period Provision within Homeowners Policy when Insurer Denies Liability
In Schmitt v. American Family Mutual Insurance, Bradley and Heather Schmitt (the”Schmitts”) made a claim to their insurer, American Family Insurance Group (“American Family”), alleging damage to their home as a result of a hail storm. American Family notified the Schmitts that it would pay for the damage to the home, but not to the roof, and the Schmitts accepted the payment. Ten years later, the Schmitts filed a breach of contract claim against American Family. American Family moved to dismiss on the basis of a one-year contractual limitations period contained in the insurance policy.
In the present case, it is undisputed that the Schmitt’s homeowners’ insurance policy contained a provision requiring that “any suit against the insurance company must be brought within one year after the loss or damage occurs.” It is further undisputed that the Schmitts waited ten years before filing their instant complaint. The Schmitts acknowledge, as they must, that as insureds in Illinois, they are charged with notice of the contents of their insurance policy, including this limitation period. As such, they are barred from raising the claim outside of that contractual limitations period. Compliance with the suit limitation provision of an insurance policy is a condition precedent to recovery under a policy. Any lawsuit filed after a contractual time limitation has expired is time-barred, unless an insurer has waived the requirements by some conduct or representation.
The Schmitts assert that they may proceed with the cause of action. They contend that when American Family denied their claim, it did not give them notice of the number of days they had to file suit, as it was required by Section 143.1 of the Insurance Code. Section 143.1 of the Insurance Code provides that whenever any insurance policy contains a provision limiting the period within which the insured may bring suit, the running of such period is tolled from the date proof of loss is filed until the date the claim is denied in whole or in part. 215 ILCS 5/143.1 (West 2002). In addition, Section 919.80(d)(8)(C) of the Administrative Code provides that when the period within which the insured may bring suit is tolled in accordance with Section 143.1 of the Insurance Code, the insurance company, at the time it denies the claim, in whole or in part, must advise the insured in writing of the number of days the period was tolled and how many days are left before the expiration of the time to bring suit.
The court reviewed whether the insurance company waived the contractual limitation period provision within the policy.
Under Illinois law, an insured demonstrates waiver of a provision of an insurance policy: (1) when the conduct of the insurer has misled the insured into acting on a reasonable belief that the insurer has waived some provision of the policy; (2) by showing facts from which it would appear that enforcement of the provision would be unjust or unconscionable, such as where the insurance company dissuades the insured from filing a lawsuit by implying that it will settle a claim; or (3) where waiver can otherwise be inferred from the circumstances.
The court found that the Schmitts have entirely failed in their burden to establish waiver of the contractual limitation period by American Family. First, the record is clear that the insurance policy itself expressly provides that any waiver of the policy’s provisions or conditions must be in writing. Second, the Schmitts have presented no evidence whatsoever that American Family’s conduct had any role in causing them to delay ten years in filing their suit. The record indisputably establishes that only 16 days after the Schmitts provided notice of their claim to American Family in 2002, American Family promptly paid out a portion of that claim and denied coverage of the other portion. American Family did not, in any way, sit on the claim in order to deprive the Schmitts of a fair opportunity to litigate the claim. Nor did it waiver from its position of denying the Schmitts’ claim, so as to permit them to reasonably believe that it would waive its limitation period. The courts have repeatedly held that no waiver occurs where the insurer denies liability and does nothing thereafter to indicate either that it would reconsider its decision or that it would waive the period for bringing suit.
Schmitt v. Am. Family Mut. Ins. Co., 2014 IL App (1st) 131666.
