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Newsflash! Rewinding the Clock for Insureds to File Claims for Deficient Policies

Authors: Audrey E. Gamble,Esquire & Robert D. Tepper, Esquire

Tick tock tick tock, the clock is ticking away for insureds to file a claim against their insurance producer where the producer was negligent in procuring a policy. On October 18, 2018, the Illinois Supreme Court clarified past confusions surrounding causes of action against insurance producers for negligent procurement of an insurance policy in the case American Family Mutual Insurance Company v. Krop, while also holding insurance customers responsible for understanding the terms of their policies.

Previously, courts frequently applied the “discovery rule” to these causes of action, finding that the statute of limitations period begins when the insured knows, or should know, of the injury. Under this rule, the action was usually deemed to have accrued when insurer denied the insured’s claim for coverage.

In Krop, the Illinois Supreme Court held that the two-year statute of limitations period for such claims begins when the policy is issued. Under the Krop decision, the clock starts  as soon as the customer receives the policy and has an opportunity to review and “reasonably understand” the policy. Applying this interpretation, the court in Krop found that the insureds’ claim against their insurance producer was barred by the statute of limitations. This decision settled the inconsistent application of the two-year statute that has led to unpredictable outcomes in negligent procurement cases.

The Krop decision also clarified that insurance producers only owe their customers a duty of ordinary care and, with rare exceptions, do not owe a fiduciary duty. Simultaneously, this decision emphasized the duty of insurance customers to read and actually understand the terms of their policy.

This decision will have a major impact on pending and future insurance producer litigation. Application of the two-year rule will result in many claims being time-barred long before the insurer denies coverage to the claimant. Now more than ever, it is critical that insureds review their policies thoroughly at the time they are received.  By the time coverage is denied, it may be too late.

For more information on this subject, please contact Robert D. Tepper, Esquire at

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Jessica Evans