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2017 IL App (1st) 161071 

No. 1-16-1071 

Third Division 

May 10, 2017 

IN THE 

APPELLATE COURT OF ILLINOIS 

FIRST DISTRICT 

AMERICAN FAMILY MUTUAL ) Appeal from the
 

INSURANCE COMPANY, ) Circuit Court of
 

) Cook County. Plaintiff-Counterdefendant-Appellee, ) 

) No. 14 CH 17305 v. 

)
 

WALTER KROP, individually and as father ) Honorable
 

and next friend of T.K., a minor; LISA KROP ) Neil Cohen, 

and MARY ANDRELOAS, as next best ) Judge Presiding.
 friend of A.A., a minor;
 ) 

) Defendants-Counterplaintiffs­ ) Third-Party Defendants-Appellants, 

)
 

)
 

(Andy Vargas, Third-Party Defendant- )
 

Appellee). )
 

)
 

JUSTICE COBBS delivered the judgment of the court, with opinion. 

Presiding Justice Fitzgerald Smith and Justice Lavin concurred in the judgment 

and opinion. 

OPINION 

¶ 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 
 

 

 

 

 

No. 1-16-1071 

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 thirdparty 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 

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No. 1-16-1071 

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 

1

On appeal, American Family makes no argument regarding the underlying complaint which gave rise to 

the insurance claim. Thus, we do not address it. 

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No. 1-16-1071 

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 making similar 

arguments. He also argues that the discovery rule does not apply to cases where the alleged 

deficiency of the policy plainly appeared on the face of the policy. 

¶ 12 American Family and Vargas brought their motions to dismiss defendant’s counterclaim 

and third-party complaint pursuant to sections 2-615 and 2-619(a)(9) of the Code. A motion 

to dismiss under section 2-619 admits the legal sufficiency of the complaint but asserts 

affirmative matters outside of the complaint barring the claim. DeLuna v. Burciaga, 223 Ill. 

2d 49, 59 (2006). A section 2-619 motion admits as true all well-pleaded facts, along with 

reasonable inferences that can be gleaned from those facts. Piser v. State Farm Mutual 

Automobile Insurance Co., 405 Ill. App. 3d 341, 344 (2010). The purpose of a section 2-619 

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No. 1-16-1071 

motion to dismiss is to dispose of issues of law and easily proved issues of fact at the outset 

of litigation. Thurman v. Champaign Park District, 2011 IL App (4th) 101024, ¶ 18. 

Specifically, subsection 2-619(a)(9) of the Code permits a court to dismiss a complaint if it 

was not commenced within the time limited by law. The court should grant a section 2-619 

motion if, after construing the documents in the light most favorable to the nonmoving party, 

there are no disputed issues of material fact. See Perelman v. Fisher, 298 Ill. App. 3d 1007, 

1013 (1998). We review the dismissal of a cause of action pursuant to section 2-619 de novo. 

Id. 

¶ 13 In their counterclaim and third-party complaint, the Krops allege that Vargas failed to 

procure the level of insurance they requested in violation of section 2-2201(d) of the Code. 

735 ILCS 5/2-2201(d) (West 2014).2 Defendants respond that any claims for a violation of 

the Code are time barred for having not been brought within the applicable two-year 

limitations period.

3 

¶ 14 Here, the parties do not dispute that claims against an insurance producer must be 

brought within two years of the date the cause of action accrues. Neither do they dispute that 

the discovery rule may extend the limitations period based upon when an insured knew or 

reasonably should have known of his injury. The parties differ, however, on when, in this 

2

Section 5/2-2201(d) provides : “While limiting the scope of liability of an insurance producer, registered 

firm, or limited insurance representative under standards governing the conduct of a fiduciary or a fiduciary 

relationship, the provisions of this Section do not limit or release an insurance producer, registered firm, or 

limited insurance representative from liability for negligence concerning the sale, placement, procurement, 

renewal, binding, cancellation of, or failure to procure any policy of insurance.” 735 ILCS 5/2-2201(d) (West 

2014).

3

Section 13-214.4 of the Code provides that “[a]ll causes of action brought by any person or entity under 

any statute or any legal or equitable theory against an insurance producer, registered firm, or limited insurance 

representative concerning the sale placement, procurement, renewal, cancellation of, or failure to procure any 

policy of insurance shall be brought within 2 years of the date the cause of action accrues.” 735 ILCS 5/13­

214.4 (West 2014). 

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No. 1-16-1071 

case, the insureds knew or reasonably should have known of their injury so as to trigger the 

running of the statute of limitations. 

¶ 15 Our supreme court has distinguished when a cause of action accrues for tort and contract 

actions. See West American Insurance Co. v. Sal E. Lobianco & Son Co., 69 Ill. 2d 126 

(1977). When the cause of action alleges tortious conduct, the cause of action generally 

accrues when the plaintiff suffers injury. Id. at 129-30. In breach of contract actions and torts 

arising out of contractual relationships, the cause of action accrues at the time of the breach, 

not when the party sustains damages. Id. at 132. Such was the case in Indiana Insurance Co. 

v. Machon & Machon, Inc., 324 Ill. App. 3d 300, 303 (2001), in which an insurer sued its 

agent. 

¶ 16 Historically, Illinois has recognized that the relationship between an insured and his 

broker, acting as the insured’s agent, is a fiduciary one. See Garrick v. Mesirow Financial 

Holdings, Inc., 2013 Il App (1st) 122228, ¶ 31; DOD Technologies v. Mesirow Insurance 

Services, Inc., 381 Ill. App. 3d 1042, 1046 (2008); AYH Holdings, Inc. v. Avreco, Inc., 357 

Ill. App. 3d 17, 32 (2005); Perelman, 298 Ill. App. 3d at 1011. Thus, for cases in which an 

insured alleges tortious conduct by its agent, although the cause of action accrues at the time 

of the breach, the statute of limitations is subject to tolling by application of the discovery 

rule. Broadnax v. Morrow, 326 Ill. App. 3d 1074, 1079 (2002). Accordingly, commencement 

of the statute of limitations is delayed until the plaintiff knows or reasonably should know of 

his injury and that it was wrongfully caused. Id.; see also Knox College v. Celotex Corp., 88 

Ill. 2d 407, 415 (1981). 

¶ 17	 Defendants assert that this court’s decision in Hoover v. Country Mutual Insurance Co., 

2012 IL App (1st) 110939, a case involving claims brought by an insured against its agent, is 

dispositive. In Hoover, the plaintiffs contacted an agent from Country Mutual Insurance for 

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No. 1-16-1071 

the purpose of obtaining additional homeowner’s insurance coverage sufficient to cover the 

replacement costs of their home and its contents in the event of a loss. Id. ¶ 20. In May 2007, 

Country Mutual delivered a new policy to the plaintiffs. Id. ¶ 4. In January 2008, the home 

was destroyed by an explosion, which prompted the Hoovers’ claim for coverage. Id. ¶ 13. 

After making several payments on the claim, the agent for Country Mutual informed the 

Hoovers that no further payments would be forthcoming as, under the terms of the policy, 

they were not entitled to full replacement cost coverage. Id. ¶¶ 16-17. 

¶ 18 In March 2010, the Hoovers sued both the agent and Country Mutual, alleging breach of 

contract, bad faith, and negligence. Id. ¶ 18. Both Country Mutual and the agent separately 

moved to dismiss the complaint, asserting, inter alia, that the action was time barred. Id. 

¶¶ 23-24. In response, the Hoovers argued that the statute of limitations was tolled until they 

actually learned of their injury, which, they maintained, was not until Country Mutual denied 

additional payment on their claim. Id. ¶ 26. The trial court dismissed all claims as time 

barred. Id. ¶ 27. 

¶ 19 A division of this court, sitting in the First District, affirmed the trial court’s dismissal. Id. 

¶ 56. In so doing, the court held that when Country Mutual provided the plaintiff with a copy 

of the policy, they “knew or should have known” of the policies’ deficiencies. Rejecting the 

Hoovers’ argument that the discovery rule tolled the statute of limitations, the court found 

that because the plaintiffs received the policy more than two years before they filed their 

complaint, the statute of limitations precluded their claims. Id. ¶ 61. 

¶ 20 Illinois cases decided prior to Hoover have applied the discovery rule to toll the statute of 

limitations in cases like the one now before us. See, e.g. Broadnax, 326 Ill. App. 3d 1074 

(2002); General Casualty Co. of Illinois v. Carroll Tiling Service, Inc., 342 Ill. App. 3d 883 

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(2003). In Broadnax, the case upon which the Krops rely, the plaintiff insured alleged that 

the defendant insurer was negligent in failing to procure an insurance policy that met his 

coverage needs with respect to a parcel of property the plaintiff intended to renovate. 

Broadnax, 326 Ill. App. 3d at 1076. When a fire destroyed the property prior to its 

renovation, the plaintiff brought a declaratory judgment action against the insurance 

company regarding coverage. The trial court granted summary judgment in favor of the 

defendant insurer, citing the plaintiff’s failure to comply with the relevant provisions of the 

policy, which was affirmed on appeal. Id. 

¶ 21 The plaintiff subsequently filed a separate negligence action against the insurance agent. 

Id. at 1077. The defendants moved to dismiss, asserting the two-year statute of limitations 

bar. The trial court granted the motion to dismiss, and on appeal to this court, sitting in the 

Fourth District, we affirmed. 

¶ 22 In its analysis, the court distinguished Indiana Insurance, the case upon which the 

insurance agents relied. The court noted that in Indiana Insurance, the claims were brought 

by the insurer against its own agent and, therefore, the cause of action as well as the 

relationship between the parties differed from those in Broadnax. Id. at 1079. Although the 

plaintiff in Broadnax did not ultimately prevail, the court noted that the defendant’s 

relationship to the plaintiff, as insurance broker and agent, was that of a fiduciary. Id. The 

court likened the case to legal malpractice cases in which the discovery rule applies to delay 

commencement of the statute of limitations. Accordingly, the court held that the plaintiff 

insured’s claim against the insurance agent accrued at the time of the denial of coverage as 

opposed to after damages were sustained as a result of the denial of coverage. Id. at 1081. 

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¶ 23 With the exception of Hoover, Broadnax has been followed in several cases to hold that a 

cause of action brought by an insured against an insurance agent accrues when coverage is 

denied. See, e.g., State Farm Fire & Casualty Co. v. John J. Rickhoff Sheet Metal Co., 394 

Ill. App. 3d 548 (2009); General Casualty, 342 Ill. App. 3d at 899-900; see also 

Commonwealth Insurance Co. v. Stone Container Corp., 323 F.3d 507, 510-11 (7th Cir. 

2003) (comparing Broadnax and Indiana Insurance to the law in other jurisdictions and 

finding nothing “outside the norm”); but see Wallace Auto Parts & Service, Inc. v. Charles L. 

Crane Agency Co., No. 14-1377-SMY-DGW, 2015 WL 8606429 (S.D. Ill. Dec. 14, 2015) 

(expressly rejecting Broadnax and following the reasoning in this court’s decision in 

Hoover). 

¶ 24 In this case, the trial court rejected the Fourth District’s decision in Broadnax, 326 Ill. 

App. 3d 1074, as well as State Farm Fire & Casualty, 394 Ill. App. 3d 548, as factually 

inapposite and found the First District’s decision in Hoover, this court’s “most recent 

pronouncement,” to be on point. 

¶ 25 More recently, in Scottsdale Insurance Co. v. Lakeside Community Committee, 2016 IL 

App (1st) 141845, a different division of this court, sitting in the First District, found reason 

not to follow Hoover. In so doing, the court reaffirmed that long line of Illinois cases which 

hold that the cause of action in these types of cases accrues when the insured learns that its 

insurer is denying coverage, not when the policy was procured. 

¶ 26 In Scottsdale, the Cook County public guardian sued the Lakeside community committee 

for the wrongful death of young Angel Hill, a ward of the court. Lakeside agreed to a consent 

judgment and assigned its claims against its insurer, Scottsdale Insurance Company, and its 

insurance broker, W.A. George Insurance Agency, to the public guardian. Scottsdale denied 

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coverage and filed a declaratory judgment action. The public guardian then filed a third-party 

complaint against W.A. George, alleging fraud, negligence, breach of contract, and breach of 

fiduciary duty in procuring the insurance policy. Id. ¶ 2. The trial court, finding that Lakeside 

knew or should have known that W.A. George obtained the wrong type of insurance policy 

when the policy was procured more than two years before the third-party complaint was 

filed, dismissed the complaint as time barred. Id. Lakeside appealed. 

¶ 27 On appeal, Lakeside, relying on the discovery rule, contended that the statute of 

limitations did not begin to run until such time as Scottsdale denied coverage. Id. ¶ 21. 

Contrarily, W.A. George contended that, as in Hoover, the discovery rule should not be 

applied to toll the statute of limitations because Lakeside was put on notice that the policy 

was inadequate on the date it was first issued. Id. In its analysis, the court found Hoover 

distinguishable, noting first that the circumstances in which Lakeside acquired its policy 

differed from the circumstances in Hoover. Id. ¶ 36. In Hoover, the plaintiffs “already had a 

homeowners’ policy and were negotiating directly with a Country Mutual agent to amend 

just one portion.” Id. Further, although “the specific type of loss that could occur *** was 

unknown, the plaintiffs in Hoover were seeking a specific provision.” Id. 

¶ 28 Conversely, Lakeside hired W.A. George to procure a policy that would cover multiple 

types of claims. Id. ¶ 37. Even had Lakeside representatives read the policy in advance, they 

would not know in advance that a claim involving the murder of a child in Department of 

Children and Family Services custody was not covered until the claim was denied. Id. 

Relying on that line of cases which hold that the discovery rule applies to toll the running of 

the statute until the insured has knowledge that coverage has been denied, the court reversed 

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the trial court’s dismissal of Lakeside’s third-party complaint against W.A. George and 

remanded for further proceedings. Id. ¶ 38. 

¶ 29 Like Scottsdale, we also decline to follow Hoover but for a different reason. The weight 

of authority in Illinois remains that the cause of action for claims of negligence between an 

insured and the insured’s agent accrues at the time coverage is denied. A review of the 

analysis in Perelman, 298 Ill. App. 3d 1007, also a First District case, is instructive. 

¶ 30 In Perelman, the plaintiff retained an insurance broker for the purpose of procuring a 

disability insurance policy that would contain a provision that would increase the amount of 

disability payments in order to meet increases in inflation. Perelman, 298 Ill. App. 3d at 

1008. The broker offered, and the plaintiff accepted, a policy with a monthly disability 

benefit of $4000. Upon issuance of the policy, an accompanying transmittal letter requested 

that the plaintiff review the policy and contact the broker if the plaintiff had any questions 

regarding his coverage. Id. 

¶ 31 The policy as issued did not contain a provision that would keep pace with inflation. In a 

sworn statement, the agent averred that he explained to plaintiff prior to issuance of the 

policy that it did not contain a cost of living adjustment. However, plaintiff averred that 

during negotiation of the policy, the agent told plaintiff that he was purchasing a 

“ ‘premier’ ” policy, which was the “ ‘best’ ” policy available at the time. The plaintiff 

alleged that when he received the policy, he “ ‘skimmed’ ” through it to confirm the monthly 

disability benefit was for the amount requested. Id. at 1008-09. 

¶ 32 Sometime later, the plaintiff suffered a disability and sought coverage, which was 

provided but without any future increases for inflation. Id. at 1009. When the policy benefits 

did not increase with inflation, the plaintiff filed claims against the broker for breach of 

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contract and negligent misrepresentation. Id. Defendant filed a motion to dismiss under 

section 2-619 of the Code. In support, the defendants argued that when the plaintiff received 

the policy he reasonably knew or should have known, for the purpose of commencing the 

limitation period under the discovery rule, that the policy did not contain a provision for an 

annual increase of benefits to meet the inflation rate. Id. at 1009-10. 

¶ 33 The policy, having been issued more than two years prior to the filing of the complaint, 

was dismissed on the agent’s motion as time barred. Id. at 1010. This court reversed. Citing 

our earlier decision in Foster v. Crum & Forster Insurance Cos., 36 Ill. App. 3d 595, 598 

(1976), we first reaffirmed that in an action where the insured sues his insurer “after failing 

to note a discrepancy between the policy issued and received versus the policy requested or 

expected, the insured will be bound by the contract terms because he or she is under a duty to 

read the policy and inform the insurer of any discrepancy so that a prompt correction may be 

made without prejudicing the rights of either party.” In such cases, plaintiffs are not excused 

from their burden of knowing the contents of the policy when there are no allegations that the 

language of the policy was ambiguous. Perelman, 298 Ill. App. 3d at 1011. 

¶ 34 That said, the court then noted the distinction between an action brought by an insured 

against the insurer, who issues the policy, and one brought by an insured against the agent, 

who procures the policy. In the latter, the relationship between the parties is one of fiduciary. 

Id. at 1011. Relying on the reasoning and the holdings in Black v. Illinois Fair Plan Ass’n, 87 

Ill. App. 3d 1106 (1980), and Economy Fire & Casualty Co. v. Bassett, 170 Ill. App. 3d 765 

(1988), the court held that the trial court erred in dismissing the plaintiff’s case because a 

genuine issue of material fact existed as to when the plaintiff knew or should have known 

that the policy was defective. Perelman, 298 Ill. App. 3d at 1013. Significantly, in Perelman, 

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the court noted that the insured’s failure to read and understand the terms of a policy 

procured by his broker was not an absolute bar to the insured’s right to recover against his 

broker for breach of the broker’s fiduciary duty. Id. 

¶ 35 As Perelman makes clear and Broadnax affirms, it is the relationship between the parties 

that defines their respective duties and, thus, also defines the point in time when the cause of 

action accrues. Put another way, when an insurance agent owes a fiduciary duty to an 

insured, a cause of action for breach of that duty accrues at the time of the breach, but the 

statute of limitations is subject to tolling by application of the discovery rule. General 

Casualty, 342 Ill. App. 3d at 900. The discovery rule inquires of the plaintiff when he or she 

knew or reasonably should have known of their injury. Hermitage Corp. v. Contractors 

Adjustment Co., 166 Ill. 2d 72, 77 (1995). This court has consistently held that in the case of 

an insured’s claim against its agent, the plaintiff knows or reasonably should know of the 

injury at the moment when coverage is denied. State Farm Fire & Casualty, 394 Ill. App. 3d 

at 566; Broadnax, 326 Ill. App. 3d at 1081; Indiana Insurance, 324 Ill. App. 3d at 304. 

¶ 36 In this case, the Krops, as insureds, filed a claim under the insurance policy procured for 

them by their agent. On August 20, 2014, coverage was denied. Accordingly, consistent with 

Perelman and its progeny, the Krops knew or reasonably should have known of their injury 

on August 20, 2014. The Krops filed their third-party complaint against the agent, Vargas, 

and American Family on September 22, 2015. Thus, their claims are not time barred. 

¶ 37 CONCLUSION 

¶ 38 For the foregoing reasons, we find that defendants’ counterclaim and third-party 

complaint were not time barred, as the cause of action accrued upon denial of coverage. 

Accordingly, we reverse the decision of the circuit court of Cook County granting plaintiff’s 

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motion to dismiss and remand for further proceedings. Because the trial court did not rule on 

plaintiff’s section 2-615 motion to dismiss, we do not address it here. 

¶ 39 Reversed and remanded. 

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