ILLINOIS OFFICIAL REPORTS
Appellate Court
Hoover v. Country Mutual Insurance Co., 2012 IL App (1st) 110939
Appellate Court BRIAN HOOVER and JULIE HOOVER, Plaintiffs-Appellants, v.
Caption COUNTRY MUTUAL INSURANCE COMPANY and MICHAEL
SPANN, Defendants-Appellees.
District & No. First District, Third Division
Docket No. 1-11-0939
Rule 23 Order filed April 18, 2012
Rule 23 Order
withdrawn May 31, 2012
Opinion filed July 18, 2012
Held The one-year limitation period in plaintiffs’ homeowners’ policy barred
(Note: This syllabus the counts of their complaint alleging breach of contract and bad faith
constitutes no part of arising from their insurer’s refusal to pay the replacement cost in
the opinion of the court connection with the total destruction of their house by an explosion, the
but has been prepared count alleging negligent misrepresentation that the policy would cover the
by the Reporter of replacement cost failed to state a cause of action, and the discovery rule
Decisions for the did not toll the statute of limitations applicable to the negligence count;
convenience of the therefore, the dismissal of all counts was affirmed.
reader.)
Decision Under Appeal from the Circuit Court of Cook County, No. 10-L-2789; the Hon.
Review Joan Powell, Judge, presiding.
Judgment Affirmed.
Counsel on Torshen, Slobig, Genden, Dragutinovich & Axel, Ltd., of Chicago (James
Appeal K. Genden and Robert J. Slobig, of counsel), for appellants.
McKnight, Kitzinger & Pravdic, LLC (Kevin Q. Butler, Cornelius E.
McKnight, and Courtney A. Adair, of counsel), and Litchfield Cavo LLP
(Alan I. Becker and Steven M. Brandstedt, of counsel), both of Chicago,
for appellees.
Panel JUSTICE NEVILLE delivered the judgment of the court, with opinion.
Presiding Justice Steele and Justice Murphy concurred in the judgment
and opinion.
OPINION
¶1 In March 2010, Brian and Julie Hoover (Hoovers), the plaintiffs, filed a complaint
against their home insurer, Country Mutual Insurance Company (Country Mutual), and
Michael Spann (Spann), a Country Mutual insurance agent. According to the complaint,
Spann promised to provide the Hoovers with an insurance policy that would cover the cost
of replacing their home and its contents, but Country Mutual refused to pay the replacement
cost when an explosion completely destroyed the Hoovers’ home in 2008. Country Mutual
and Spann filed separate motions to dismiss the Hoovers’ amended complaint, pursuant to
section 2-619 of the Code of Civil Procedure (735 ILCS 5/2-619 (West 2010)), claiming,
inter alia, that the Hoovers failed to file their complaint within the applicable statutory
limitations period and within the one-year limitation provision delineated in the policy. The
trial court granted both motions, but the court granted the Hoovers leave to amend their
complaint. When the Hoovers elected to stand on their verified amended complaint, the trial
court entered a final order that dismissed the Hoovers’ complaint against Country Mutual and
Spann. On appeal, we must decide whether the trial court erred when it granted the
defendants’ motions to dismiss all the counts in the Hoovers’ complaint as time barred.
¶2 We hold (1) that the insurance policy’s one-year limitation period bars counts I and II
against County Mutual for breach of contract and bad faith; (2) that count III of the complaint
fails to state a cause of action for negligent misrepresentation; and (3) that count IV, the
negligence count, was untimely under the applicable statute of limitations because the
plaintiffs were given a copy of their policy and, therefore, they knew or reasonably should
have known more than two years before they filed their complaint that the liability limits in
their policy were inadequate to cover the replacement cost of their house and its contents.
Accordingly, we affirm the trial court’s order that dismissed all counts of the plaintiffs’
complaint.
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¶3 BACKGROUND
¶4 In 1998, the Hoovers and their family built a house on their land near Pittsfield, Illinois.
In 2004, the Hoovers purchased a homeowners’ insurance policy from the defendant,
Country Mutual, to insure against a loss in the event of a fire or other casualty. In May 2007,
the Hoovers met with Spann, a Country Mutual insurance agent, to obtain additional
coverage that would cover the replacement cost of their home and its contents in the event
of a loss.
¶5 Spann obtained a new insurance policy from Country Mutual which contained (1)
definitions, (2) covered loss provisions, (3) provisions explaining how covered losses are
settled, (4) personal property provisions, (5) an inflation rider, and (6) conditions that are
relevant to this case and were delineated in the policy as follows.
¶6 The policy defined replacement cost and actual cash value for buildings and structures
as follows:
“Replacement Cost
The cost actually and necessarily incurred to repair or replace the damaged property
using standard new construction materials of like kind and quality and standard new
construction techniques.
***
1. ‘Actual cash value’ means:
a. For buildings or structures the lesser of the following, as determined by
‘us’:
(1) The cost actually and necessarily incurred to repair or replace the
damaged property using standard new construction materials of like kind and
quality and standard new construction techniques, less depreciation; or
(2) Fair market value.
b. For property other than buildings and structures the lesser of the following,
as determined by ‘us’:
(1) The cost to repair or replace the damaged property using materials of
like kind and quality, less depreciation; or
(2) Fair market value.”
¶7 The policy delineated the following covered losses:
“Loss settlement
‘We’ settle covered losses according to Loss Settlement1, Loss Settlement 2 or Loss
Settlement 3 ***, depending on what number appears on the Declarations in the ‘LOSS
STLMT’ column for applicable coverage ***.”
¶8 The policy also explained how Covered losses are settled:
“1. Loss Settlement 1–80% Insurance Requirement
If ‘1’ appears in the Declarations under ‘Loss STLMT’:
a. ‘We’ pay ‘replacement cost’ unless paragraph b. applies ***.
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b. If the applicable limit of liability for the damaged property is less than 80% of
its ‘replacement cost’ at the time of loss, ‘we’ will pay ‘actual cash value.’ ”
¶9 The policy contained a personal property provision:
“Property covered under Personal Property, Coverage D will be settled under Loss
Settlement 3–Actual Cash value at the time of loss, unless ‘you’ purchase Coverage DD
Personal Property Replacement Cost.”
¶ 10 The policy also contained an inflation rider:
“The limit of liability specified in the Declarations for those items in SECTION 2 of the
policy, which are indicated as having inflation coverage, will be increased at the same
rate as the increase in Company Dwelling and Personal Property Index.”
¶ 11 Finally, the policy contained Conditions:
“Conditions–SECTION 2 through 6 (Includes Limitations)
A. Insurable Interest And Limit of Liability
‘We’ will not be liable in any one ‘occurrence’:
***
2. For more than the applicable limit of liability.
Suit Limitation Provision
Suit Against Us
No action can be brought against ‘us’ unless there has been full compliance
with all the terms under SECTION 2 through 6 of this policy and the action is
started within one year after the date of the ‘occurrence.’ ”
¶ 12 The Hoovers’ policy declarations listed the dwelling coverage under loss settlement 1 and
their personal property coverage under loss settlement 3. According to the complaint, Spann
obtained a new policy with increased liability limits for the Hoovers’ home and personal
property. Thereafter, the Hoovers began paying increased premiums on the new insurance
policy.
¶ 13 On January 12, 2008, an explosion completely destroyed the Hoovers’ home. The
Hoovers’ copy of their insurance policy was destroyed in the fire. In February 2008, a
contractor working for the Hoovers estimated the cost of replacing their home at $513,000.
The Hoovers calculated their personal property loss at $370,000. The Hoovers made a claim
with Country Mutual for the replacement cost of their home and its contents.
¶ 14 In February 2008, the Hoovers received a letter from Greg Backoff, a property claims
specialist at Country Mutual. The letter stated that “your homeowners policy includes
‘Replacement Costs’ coverage on the building and the contents.” In late February 2008,
Country Mutual sent a check to Brian Hoover in the amount of $219,180.58, accompanied
by a letter which stated: “this amount reflects the actual cash value of your property at the
time of the loss. Once the repairs/replacements have been completed, please submit the paid
receipt(s) to my attention so we can determine what additional amount will be reimbursed
under your replacement cost coverage.”
¶ 15 Country Mutual paid the Hoovers a total of $265,000 for the loss of the dwelling and
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$198,000 for the personal property loss as of March 2008.
¶ 16 During the first week of August 2008, Brian Hoover gave Spann the Hoovers’ most
recent paid receipts, but Spann informed Brian Hoover that Country Mutual would not be
making any further payments on the loss.
¶ 17 Country Mutual refused to pay the Hoovers the full replacement cost for their home and
personal property. Country Mutual argued that the Hoovers’ insurance policy did not entitle
them to full replacement cost coverage on their house because they purchased a policy with
a liability limit that was less than 80% of the actual replacement cost of their home.
¶ 18 On March 3, 2010, the Hoovers filed their initial four-count complaint against Country
Mutual and Spann. Country Mutual and Spann filed separate motions to dismiss the
Hoovers’ complaint. The court granted both motions and dismissed the complaint with leave
to amend.
¶ 19 On September 10, 2010, the Hoovers filed their verified amended complaint. The
amended complaint contained the same counts as the initial complaint. In counts I and II, the
Hoovers alleged that Country Mutual breached its contract and acted in bad faith. In counts
III and IV, they alleged that Spann and his employer, Country Mutual, had negligently
misrepresented facts and were negligent.
¶ 20 According to the Hoovers’ amended complaint, Brian Hoover visited Spann in May 2007
because the Hoovers realized that in the event of a catastrophic loss, they would not be able
to rebuild their home with their own labor as they had done in the past. The complaint
alleged that Brian Hoover told Spann that he wanted sufficient insurance coverage to cover
the replacement cost of his home and its contents in the event of a loss by fire or other
casualty. Brian Hoover averred in his affidavit that Spann assured him that he had procured
full replacement cost coverage for his home and its contents.
¶ 21 The Hoovers alleged that during the process of procuring their new insurance policy,
Spann did nothing to ascertain what the actual costs would be to replace their home in the
event of a loss and Spann did not advise them that they would not receive the replacement
cost to replace their home and its contents unless they purchased an insurance policy with
liability limits of at least 80% of the actual replacement cost of their home and its contents
at the time of the loss. In addition, the complaint alleged that based on the increased coverage
in the new insurance policy, Spann led the Hoovers to believe that “he had obtained a
replacement cost insurance policy that would cover the actual cost of the replacement of the
Hoovers’ home and its contents, with a home of like kind and quality, in the event of a fire
or casualty loss.”
¶ 22 During discovery, Country Mutual sent the Hoovers a request for admission pursuant to
Illinois Supreme Court Rule 216 (eff. Jan. 1, 2011). The Hoovers responded and admitted
that the attached insurance policy, which had declarations and endorsements, was a true and
correct copy of the policy of insurance that they had with Country Mutual.
¶ 23 Country Mutual filed its motion to dismiss counts I and II of the Hoovers’ amended
complaint, pursuant to section 2-619(a)(9) of the Code of Civil Procedure, and argued that
the counts were barred by the applicable contractual limitation period. Country Mutual
adopted the time limitation argument asserted by Spann in his motion to dismiss with regard
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to counts III and IV. In addition, Country Mutual argued that it could not be held liable under
the doctrine of respondeat superior where its alleged agent did not owe a duty of care and
where counts III and IV were also time barred. Lastly, Country Mutual argued that neither
Country Mutual nor Spann owed the Hoovers a duty to provide adequate insurance coverage.
¶ 24 Spann filed a motion to dismiss counts III and IV of the Hoovers’ verified amended
complaint pursuant to section 2-619(a)(5) of the Code of Civil Procedure. Spann alleged in
his motion that the court should dismiss counts III and IV of the Hoovers’ complaint because
the applicable statute of limitations barred both counts and because the Hoovers failed to
show that Spann owed them a duty that would support their claims of negligent
misrepresentation and negligence.
¶ 25 Spann also argued that the plaintiffs knew or should have known of their injury no later
than February 2008. Spann supported his motion with the deposition transcript of attorney
Kenneth Carlson. Mr. Carlson testified during his deposition that Brian Hoover was his
wife’s cousin and that he had acted as an attorney for the Hoovers in February 2008,
regarding the claims process on their fire loss. Carlson also testified that he spoke with Spann
in late February 2008 to ensure that the Hoovers’ receipt of any check would not be
accompanied by any waivers or releases. During the deposition, Spann’s attorney produced
a note from the Hoovers’ claim file which indicated that the conversation between Spann and
Carlson might have taken place on February 21, 2008, and it also confirmed Carlson’s
testimony that he requested a copy of the policy’s declarations. Carlson further testified that
he could not recall the exact date but he believed it to have been sometime in late February
or early March 2008 that he received a copy of the policy’s declarations from Brian Hoover’s
mother. Finally, he testified that he did not speak with the Hoovers after he received the
policy’s declarations.
¶ 26 In the Hoovers’ response to Spann’s motion to dismiss counts III and IV, they argued that
their claims against Spann were not time barred because the discovery rule postponed the
running of the limitations period until the Hoovers learned of their injury, and they learned
of the injury in August 2008 when Spann advised the Hoovers that Country Mutual would
not be making any further payments.
¶ 27 On December 27, 2010, the circuit court held a hearing on the motions to dismiss. After
the hearing, the circuit court dismissed all counts as time barred, but it granted the Hoovers
leave to file a second amended complaint. The Hoovers decided to stand on their amended
complaint, and they filed a motion requesting that the court enter a final and appealable order
disposing of all four counts. On March 16, 2011, the trial court entered the following order:
“1. The Plaintiffs’ Verified Amended Complaint was dismissed without prejudice on
December 27, 2010, based upon certain defects and affirmative matters.
2. On December 27, 2010, the plaintiffs were given leave to file a second amended
complaint on or before January 26, 2011.
3. The plaintiffs*** have expressly elected to stand on the Verified Amended
Complaint in order to obtain a final, appealable order.
4. In light of the foregoing, the plaintiffs’ Verified Amended Complaint in its entirety
is hereby dismissed with prejudice.”
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¶ 28 The Hoovers timely filed their notice of appeal pursuant to Supreme Court Rules 301 and
303. Ill. S. Ct. R. 301 (eff. Feb. 1, 1994); Ill. S. Ct. R. 303 (eff. May 30, 2008).
¶ 29 ANALYSIS
¶ 30 Standard of Review
¶ 31 In this case, the trial court granted the defendants’ motions to dismiss that were
predicated on section 2-619 of the Code of Civil Procedure (Code) (735 ILCS 5/2-619(a)
(West 2010)). A motion to dismiss under section 2-619 of the Code admits the legal
sufficiency of the complaint, but asserts affirmative matters outside the complaint that defeat
the cause of action. Kean v. Wal-Mart Stores, Inc., 235 Ill. 2d 351, 361 (2009). Specifically,
section 2-619(a)(5) of the Code permits a court to dismiss a complaint if it was not
commenced within the time limited by law. 735 ILCS 5/2-619(a)(5) (West 2010). Section
2-619(a)(9) permits an involuntary dismissal when the claim is “barred by other affirmative
matter avoiding the legal effect of or defeating the claim.” 735 ILCS 5/2-619(a)(9) (West
2010). When ruling on a section 2-619 motion, a court must accept as true all well-pleaded
facts in the plaintiff’s complaint and all reasonable inferences. Hermitage Corp. v.
Contractors Adjustment Co., 166 Ill. 2d 72, 85 (1995) (citing Burdinie v. Village of Glendale
Heights, 139 Ill. 2d 501, 505 (1990)). The motion should be granted if, after construing the
documents in support of and in opposition to the motion in the light most favorable to the
nonmoving party, there are no disputed issues of material fact. Whetstone v. Sooter, 325 Ill.
App. 3d 225, 229 (2001) (citing Noesges v. Servicemaster Co., 233 Ill. App. 3d 158, 162
(1992)). We review an order dismissing a case based on section 2-619 of the Code de novo.
Kean, 235 Ill. 2d at 361.
¶ 32 In order to determine whether the circuit court properly dismissed all four counts of the
Hoovers’ complaint, we must construe a statute of limitations and an insurance policy, which
is a contract. Therefore, because construction of a statute and a contract present questions of
law, we also employ a de novo standard of review. American States Insurance Co. v. Koloms,
177 Ill. 2d 473, 479-80 (1997); Belleville Toyota, Inc.v. Toyota Motor Sales, U.S.A., Inc., 199
Ill. 2d 325, 345 (2002).
¶ 33 Breach of Contract
¶ 34 The Hoovers contend that the trial court erred when it dismissed count II as time barred
based on the one-year contractual limitation provision because their copy of the insurance
policy was destroyed in the fire and the circuit court therefore could not determine whether
the provision was in fact contained in the policy. We note, however, that the Hoovers
admitted in their response to Country Mutual’s Rule 216 request to admit that the copy of
the insurance policy that Country Mutual appended to the request to admit was a true and
correct copy of the policy of insurance that they had with Country Mutual. Admissions made
pursuant to a request to admit under Rule 216 are tantamount to judicial admissions and as
such are taken as true. Mt. Zion State Bank & Trust v. Consolidated Communications, Inc.,
169 Ill. 2d 110, 125 (1995) (citing City of Champaign v. Roseman, 15 Ill. 2d 363 (1958)).
Therefore, once the Hoovers admitted that the insurance policy Country Mutual appended
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to the Rule 216 request to admit was a true and correct copy of their insurance policy, the
Hoovers cannot now claim, because the policy was destroyed in the fire, that the suit
limitation provision contained in their insurance policy does not exist.
¶ 35 The suit limitation provision in the Hoovers’ insurance policy provided that all suits
against Country Mutual must be brought within one year of the date of the occurrence. In
Cramer v. Insurance Exchange Agency, 174 Ill. 2d 513 (1996), our supreme court held that
compliance with a suit limitation provision within a policy is a condition precedent to
recovery under the policy. Cramer, 174 Ill. 2d at 530 (citing Schoonover v. American Family
Insurance Co., 214 Ill. App. 3d 33, 44 (1991)). In Cramer, the insurance policy at issue had
a one year suit limitation provision similar to the one in this case. The policy provision
provided that a suit on the policy must be brought within one year of the loss. The court
found that the plaintiff’s suit was untimely because the plaintiff filed the complaint more
than one year after the loss. Cramer, 174 Ill. 2d at 530. Here, the Hoovers’ home was
destroyed on January 12, 2008. The Hoovers filed their initial complaint against Country
Mutual on March 3, 2010, more than two years after the explosion. Therefore, based on the
one-year suit limitation provision in the policy, the Hoovers’ breach of contract claim was
untimely. Cramer, 174 Ill. 2d at 530.
¶ 36 The Hoovers next contend that notwithstanding the suit limitation provision in the policy,
the court should apply the discovery rule to determine if the suit was untimely. In Wilson v.
Indiana Insurance Co., 150 Ill. App. 3d 669 (1986), this court noted that Illinois case law
establishes that insurance policies may validly set forth contractual time limitations requiring
suits to be brought within a specified period of time. Wilson, 150 Ill. App. 3d at 672 (citing
Peoria Marine & Fire Insurance Co. v. Whitehill, 25 Ill. 382 (1861)). A limitation provision
is but another provision of the standard policy, one of many that may effectively bar relief
to the insured. Wilson, 150 Ill. App. 3d at 672. The Wilson court refused to apply the
discovery rule to the facts in that case, noting that no court of this state had adopted the
discovery rule with regard to the time limits of policies for filing suits to recover for losses
covered thereby. Wilson, 150 Ill. App. 3d at 672 (citing Naghten v. Maryland Casualty Co.,
47 Ill. App. 2d 74 (1964)). The Wilson court concluded that the plaintiff’s complaint was
untimely because the plaintiff failed to comply with the contractual limitation provision in
the policy. Wilson, 150 Ill. App. 3d at 673. In light of Wilson, we will not apply the discovery
rule to the Hoovers’ breach of contract count. Accordingly, we hold that the trial court did
not err when it dismissed the breach of contract count.
¶ 37 Insurance Bad Faith
¶ 38 Next, the Hoovers contend that the one-year suit limitation provision does not apply to
their bad-faith claim against Country Mutual because it is not an action for breach of
contract. Section 155 of the Illinois Insurance Code provides:
“In any action by or against a company wherein there is in issue the liability of a
company on a policy or policies of insurance or the amount of the loss payable
thereunder, or for an unreasonable delay in settling a claim, and it appears to the court
that such action or delay is vexatious and unreasonable, the court may allow as part of
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the taxable costs in the action reasonable attorney fees, other costs ***.” 215 ILCS 5/155
(West 2010).
¶ 39 In Cramer, our supreme court addressed the tort of bad faith and unfair dealing and
explained that historically, a policyholder’s only recourse was to seek a breach of contract
remedy to receive the policy proceeds. Cramer, 174 Ill. 2d at 521. The Cramer court further
explained that section 155 created a limited statutory exception that allowed insureds to
recover attorney fees and punitive damages from insurers that unreasonably delayed or
denied payment of an insurance claim. Cramer, 174 Ill. 2d at 521. The Cramer court found
that the tort of bad faith is not a separate and independent tort action that is recognized in
Illinois. Cramer, 174 Ill. 2d at 519-26. The Cramer court held:
“[T]he statute provides an extracontractual remedy for policyholders who have suffered
unreasonable and vexatious conduct by insurers with respect to a claim under the policy.
It presupposes an action on the policy. As such, nothing in the statute addresses tortious
conduct or tort liability in general. The statute simply provides an extracontractual
remedy to an action on the policy.” Cramer, 174 Ill. 2d at 523-24.
¶ 40 The Cramer court explained that the statute presupposes an action on the policy, and
therefore, in order for a plaintiff to recover under section 155, he must also succeed in the
action on the policy. See Cramer, 174 Ill. 2d at 524; Johnson Press of America, Inc. v.
Northern Insurance Co. of New York, 339 Ill. App. 3d 864, 875 (2003) (citing Martin v.
Illinois Farmers Insurance, 318 Ill. App. 3d 751, 764 (2000) (the court found that the
plaintiff’s loss was not covered by the insurance policy and held that the defendant could not
be held liable for section 155 relief where no benefits were owed)).
¶ 41 Therefore, because the breach of contract action was time barred, and the Hoovers’ claim
for bad faith against Country Mutual was dependent on the success of the breach of contract
action, the trial court did not err when it dismissed the bad-faith count against Country
Mutual. See Johnson Press of America, Inc., 339 Ill. App. 3d at 875.
¶ 42 Negligent Misrepresentation
¶ 43 In count III of the Hoovers’ amended complaint, they alleged that Spann negligently
misrepresented facts and led them to believe that he had procured full replacement cost
coverage for their home and personal property. The trial court dismissed count III as time
barred. The defendants ask us to affirm the dismissal both because the Hoovers did not
timely file the complaint and because the complaint does not allege facts that show the
defendant owed the Hoovers a duty not to negligently misrepresent the policy coverage. A
reviewing court need not accept the reasons given by the circuit court for its judgment.
“Rather, a reviewing court can uphold the decision of the circuit court on any grounds which
are called for by the record regardless of whether the circuit court relied on those grounds and
regardless of whether the circuit court’s reasoning was correct.” Ultsch v. Illinois Municipal
Retirement Fund, 226 Ill. 2d 169, 192 (2007) (citing Rodriguez v. Sheriff’s Merit Comm’n,
218 Ill. 2d 342, 357 (2006)).
¶ 44 We first note that the suit limitation provision in the contract does not apply to count III
because the negligent misrepresentation count is a tort action against Spann and Country
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Mutual and it is not an action for breach of the Hoovers’ contract with Country Mutual. See
Adams v. Northern Illinois Gas Co., 211 Ill. 2d 32, 67 (2004). Before we decide if the
applicable limitations period bars the negligent misrepresentation count, we must first
address the defendants’ argument that the Hoovers have not alleged sufficient facts to state
a cause of action for negligent misrepresentation.
¶ 45 In order to state a cause of action for negligent misrepresentation, a complaint must first
allege facts establishing that the defendants owed the plaintiff a duty to communicate
accurate information. Brogan v. Mitchell International, Inc., 181 Ill. 2d 178, 183 (1998)
(citing Board of Education v. A, C & S, Inc., 131 Ill. 2d 428, 452 (1989)). Our supreme court
explained in Brogan that it has recognized a duty to communicate accurate information in
only two circumstances. First, the court has imposed a duty to avoid negligently conveying
false information where the information results in physical injury to a person or harm to
property. Brogan, 181 Ill. 2d at 183-84 (citing Board of Education, 131 Ill. 2d at 454-56).
Second, the court has imposed a duty to avoid negligently conveying false information where
one is in the business of supplying information for the guidance of others in their business
transactions. Brogan, 181 Ill. 2d at 184 (citing Moorman Manufacturing Co. v. National
Tank Co., 91 Ill. 2d 69, 89 (1982)). Cases addressing the tort of negligent misrepresentation
have also held that negligent misrepresentation actions are almost universally limited to
situations involving a defendant who, in the course of his business or profession, supplies
information for the guidance of others in their business relations with third parties. Lang v.
Consumers Insurance Service, Inc., 222 Ill. App. 3d 226, 235 (1991) (citing Black, Jackson
& Simmons Insurance Brokerage, Inc. v. International Business Machines Corp., 109 Ill.
App. 3d 132, 135 (1982)).
¶ 46 Here, the information that Spann supplied to the Hoovers did not result in any physical
harm to the Hoovers, nor did the Hoovers’ reliance on Spann’s information cause the damage
to their home and property. See Restatement (Second) of Torts § 311 cmt. d, illus. 8 (1965).
Therefore, the first test a court uses to determine whether to impose a duty on a defendant
to communicate accurate information does not apply in this case.
¶ 47 Next, we must determine whether the defendants in this case were in the business of
supplying information for the guidance of others in their business transactions which would
impose a duty on defendants to communicate accurate information to the Hoovers.
According to the allegations in the Hoovers’ complaint, Country Mutual is in the business
of selling insurance. The parties agree that Spann was acting as an agent of Country Mutual
at the time of the occurrence. Because Spann was Country Mutual’s agent, he too was
engaged in the business of selling homeowners’ insurance. See Lang, 222 Ill. App. 3d at 234.
A true agency requires that the agent’s function is to carry out the principal’s business. Lang,
222 Ill. App. 3d at 234 (citing Clapp v. JMK/Skewer, Inc., 137 Ill. App. 3d 469, 472 (1985)).
Based on the allegations in the plaintiffs’ complaint, both Country Mutual and Spann were
selling homeowners’ insurance to members of the public, including the plaintiffs. The
defendants sold the Hoovers homeowners’ insurance, but at no time were they engaged in
the business of providing information to the plaintiffs for guidance in business transactions.
See Lang, 222 Ill. App. 3d at 234. Therefore, any information that Spann gave to the Hoovers
was not supplied to aid the Hoovers in doing business with a third party but was merely
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ancillary to his sale of homeowners’ insurance. See Lang, 222 Ill. App. 3d at 236; Fireman’s
Fund Insurance Co. v. SEC Donohue, Inc., 176 Ill. 2d 160, 168 (1997) (the negligent
misrepresentation exception to the Moorman doctrine is not applicable if the information
supplied is merely ancillary to the sale of a product).
¶ 48 The Hoovers also argued that Spann voluntarily assumed the duty to make a correct
representation when Spann “affirmatively assured” Brian Hoover that he had obtained the
replacement cost policy that Hoover had requested. We find that the Hoovers’ voluntary
undertaking argument fails because, as Spann argued, such a cause of action is limited to
cases where the plaintiff suffers physical harm caused by action taken in reasonable reliance
on the information supplied by defendant. See Vancura v. Katris, 238 Ill. 2d 352, 382 (2010)
(citing Restatement (Second) of Torts § 323 (1965), and Frye v. Medicare-Glaser Corp., 153
Ill. 2d 26, 32 (1992)).
¶ 49 Accordingly, we hold that the Hoovers have failed to allege facts that state a cause of
action for negligent misrepresentation against Spann and Country Mutual, and, therefore,
there is no need to address whether the negligent misrepresentation claim was time barred.
¶ 50 Negligence
¶ 51 Finally, the Hoovers contend in count IV of their complaint that Spann was negligent
when he failed to procure an insurance policy that provided replacement cost coverage
according to their instructions. First, we must determine whether the plaintiffs’ negligence
count was timely. The statute of limitations for a negligence action against an insurance
producer, like Spann, is found in section 13-214.4 of the Code. 735 ILCS 5/13-214.4 (West
2010). Section 13-214.4 of the Code provides that all actions against an insurance producer
must be brought within two years of the date the cause of action accrues. 735 ILCS 5/13-
214.4 (West 2010).
¶ 52 In determining when a cause of action accrues under the statute, this court has explained
that for contract actions and torts arising out of contractual relationships, the cause of action
accrues at the time of the breach of the contract, not when a party sustains damages. Indiana
Insurance Co. v. Machon & Machon, Inc., 324 Ill. App. 3d 300, 303 (2001). In this case, the
cause of action accrued in May 2007 when Spann allegedly procured an insurance policy for
the Hoovers that did not comply with their requests, and the statute of limitations would have
expired in May 2009. Therefore, since the Hoovers filed their initial complaint on March 3,
2010, more than two years after the cause of action accrued, the complaint was untimely,
unless tolled by the discovery rule.
¶ 53 The Discovery Rule
¶ 54 The parties acknowledge that the discovery rule may be used to toll the applicable statute
of limitations. However, the dispute concerns when the plaintiffs’ knew or reasonably should
have known of their injury.
¶ 55 The discovery rule relating to the statute of limitations has been applied across a broad
spectrum of litigation to alleviate what has been viewed as harsh results resulting from the
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literal application of the statute. Knox College v. Celotex Corp., 88 Ill. 2d 407, 414 (1981).
Cases applying the discovery rule hold that the statute starts to run when the plaintiff knows
or reasonably should know that he has been injured and that his injury was wrongfully
caused. Witherell v. Weimer, 85 Ill. 2d 146, 156 (1981) (citing United States v. Kubrick, 444
U.S. 111 (1979)); Knox College, 88 Ill. 2d at 415. At that point, the injured person possesses
sufficient information concerning his injury and its cause to put a reasonable person on notice
to determine whether actionable conduct is involved. Knox College, 88 Ill. 2d at 416. The
court should enter judgement as a matter of law when the undisputed facts allow for only one
conclusion as to when the plaintiff had sufficient information. Jackson Jordan, Inc. v.
Leydig, Voit & Mayer, 158 Ill. 2d 240, 250 (1994).
¶ 56 In the present case, the facts establish that Brian Hoover received a copy of Country
Mutual’s policy because he indicates in his affidavit that it was destroyed in the fire. In May
2007, the facts establish that Hoover only sought to increase the liability limits in the policy
for his house and its contents. But, the facts also establish that at no time did Hoover seek
to change two provisions in the policy: (1) the provision which required losses with loss
settlement 1 to have an 80% insurance requirement, and (2) the condition which provided
that the company will not be liable in any one occurrence for more than the applicable limit
of liability.
¶ 57 The Hoovers’ dwelling was covered under loss settlement 1 in the policy which states
that the liability limit for the dwelling had to be at least 80% of what the cost would be to
replace the property in order to satisfy the requirement for replacement cost coverage. In the
event the liability limits were not 80% of the costs to replace the property, Country Mutual
would only pay actual cash value for the property.
¶ 58 The declarations delineated the policy limits for the Hoovers’ home and personal
property as follows: dwelling $258,000; and personal property $193,500. We note that the
inflation rider increased the liability limits to $265,000 for the dwelling and $198,000 for
personal property. Regardless of the actual replacement cost, the policy contained a
limitation on the amount that Country Mutual would pay. The conditions section of the
policy provided that Country Mutual would not be liable in any one occurrence for more than
the applicable limit of liability.
¶ 59 Therefore, Country Mutual acted pursuant to the terms of the policy when it paid the
Hoovers the liability limits as dictated by the terms of the policy. While laymen may not, as
a common practice, read insurance policies, we cannot excuse plaintiffs from their burden
of knowing the terms and liability limits of their insurance policies and bringing alleged
discrepancies to the attention of their insurance company. Foster v. Crum & Forster
Insurance Cos., 36 Ill. App. 3d 595, 598 (1976).
¶ 60 We find that once the Hoovers received the policy, they were in the best position to
determine if the policy’s $258,000 liability limit for their house was sufficient to meet the
80% replacement cost requirement, and by receiving the policy prior to the fire, they had an
opportunity to read their insurance policy and determine whether the policy limits with
Country Mutual were adequate.
¶ 61 When Country Mutual provided the Hoovers with a copy of their insurance policy, which
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delineated the liability limits for the house and its contents, they had all the information that
they needed to determine the limits of their coverage. Therefore, we hold that the discovery
rule does not toll the statute of limitations because the Hoovers knew or should have known
more than two years before they filed their complaint that the policy did not contain liability
limits that would provide them with full replacement coverage. Accordingly, because the
negligence count was untimely, we need not address the issue of whether Spann had a duty
to provide the Hoovers with the coverage that they requested.
¶ 62 CONCLUSION
¶ 63 We hold (1) that the trial court did not err when it dismissed the breach of contract count
against Country Mutual, and (2) that the trial court did not err when it dismissed the bad-faith
count against Country Mutual. We also hold that the Hoovers failed to state a cause of action
for negligent misrepresentation in count III against Spann and Country Mutual. Finally, we
hold that count IV, the negligence count, was barred by the statute of limitations and that the
discovery rule does not toll the statute of limitations because Country Mutual provided the
Hoovers with a copy of their policy and, therefore, they knew or should have known that the
liability limits in their policy did not provide full replacement coverage on their home and
personal property more than two years before they filed their complaint against the
defendants.
¶ 64 Affirmed.
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