American Family Mutual Insurance Company v. Krop

2018 IL 122556

IN THE
SUPREME COURT
OF
THE STATE OF ILLINOIS

(Docket No. 122556)

AMERICAN FAMILY MUTUAL INSURANCE COMPANY v.
WALTER KROP et al., Appellees (Andy Varga, Appellant).

Opinion filed October 18, 2018.

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

Chief Justice Karmeier and Justices Thomas, Burke, and Neville concurred in
the judgment and opinion.

Justice Theis dissented, with opinion, joined by Justice Kilbride.

OPINION

¶1 When customers allege that their insurance company negligently sold them a
deficient insurance policy, section 13-214.4 of the Code of Civil Procedure (Code)
gives those customers a two-year deadline to file any lawsuits. 735 ILCS
 5/13-214.4 (West 2014). In this case we are asked to determine when the cause of
action accrues in such cases. American Family Mutual Insurance Company
(American Family) filed a declaratory judgment action against Walter and Lisa
Krop, contending their homeowner’s insurance policy did not cover a tort action
pending against their son. The Krops filed a counterclaim against American Family
and a third-party claim against Andrew Varga, an insurance agent for American
Family. Varga argued at the circuit court that the cause of action for negligently
selling a deficient policy accrues as soon as customers purchase their policy. The
Krops claimed that the cause of action does not accrue until the insurer refuses to
provide coverage. Agreeing with Varga, the circuit court dismissed the Krops’
claims against Varga and American Family as untimely. The appellate court
reversed. 2017 IL App (1st) 161071. Varga petitioned for leave to appeal, and we
allowed the petition. Ill. S. Ct. R. 315(a) (eff. Mar. 15, 2016).

¶2 We hold that when customers have the opportunity to read their insurance
policy and can reasonably be expected to understand its terms, the cause of action
for negligent failure to procure insurance accrues as soon as the customers receive
the policy. Here the Krops filed their complaint over two years after they received
their American Family policy, and they did not plead facts that would support any
recognized exception to the expectation that customers will read the policy and
understand its terms, so their claim was untimely. We reverse the appellate court’s
decision.

¶3 BACKGROUND

¶4 In early 2012 Walter and Lisa Krop asked Andrew Varga to provide them with
a new homeowner’s insurance policy from American Family. Although the details
of their interactions with Varga are contested, the Krops claim that they gave him a
copy of their old policy with Travelers insurance company and requested a new
policy that was “equal to the coverages provided by Travelers.” They further allege
that Varga promised to provide them with an American Family policy that was
equal to or better than the Travelers policy for a similar price. American Family and
the Krops agreed to a policy, which American Family issued on March 21, 2012.
The Krops renewed this policy each of the next three years.

-2-
¶5 In mid-2014, Mary Andreolas sued the Krops, seeking damages for defamation,
invasion of privacy, and intentional infliction of emotional distress. The specifics
of the lawsuit are not relevant to this decision, except that on August 20, 2014,
American Family denied the Krops coverage for Andreolas’s suit.

¶6 Soon thereafter American Family filed a declaratory judgment action in the
circuit court of Cook County to justify its denial of coverage. The complaint cited
portions of the Krops’ policy that American Family argued excluded the alleged
torts from coverage. In a section of the policy titled “LIABILITY
COVERAGES—SECTION II,” American Family had promised:

“We will pay, up to our limit, compensatory damages for which any insured is
legally liable because of bodily injury or property damage caused by an
occurrence covered by this policy.”

The policy’s definition of “bodily injury” excluded “emotional or mental distress,
mental anguish, mental injury, or any similar injury unless it arises out of actual
bodily harm to the person.” Finally, the policy defined “occurrence” as “an
accident, including exposure to conditions, which results during the policy period
in: a. bodily injury; or b. property damage.”

¶7 American Family claimed that this policy did not cover liability for the alleged
defamation, invasion of privacy, or intentional infliction of emotional distress
because Andreolas did not seek damages for any bodily injury. Additionally,
American Family argued that, because the policy only covered “damage caused by
an occurrence” and an “occurrence” requires an “accident,” the policy did not cover
the Krops’ liability for the intentional conduct that Andreolas alleged.

¶8 On September 3, 2015, the Krops responded with a counterclaim against
American Family and a third-party complaint against Varga. They alleged that
Varga negligently failed to provide them with an insurance policy equal to their
Travelers policy, as they had requested, and that American Family was vicariously
liable for its agent’s negligence. The Travelers policy had covered liability for
“personal injury” as well as bodily and property injuries. Although both policies
extended coverage to injuries caused by “occurrences,” the Travelers policy
defined “occurrence” to include an “offense *** that results in ‘personal injury.’ ”
The American Family policy did not include offenses causing personal injury in its

-3-
 definition of “occurrence.” According to the Krops, Varga failed to exercise
ordinary care, and this failure caused the Krops to lack coverage for personal
liability in Andreolas’s lawsuit.

¶9 Varga and American Family both moved to dismiss the Krops’ claims under
sections 2-615 and 2-619 of the Code. 735 ILCS 5/2-615, 2-619 (West 2014).
Section 13-214.4 of the Code creates a two-year statute of limitations for claims
against insurance producers. Id. § 13-214.4. Varga and American Family argued
that this two-year period began when the Krops first received their policy in March
2012, so their claims were untimely after March 2014.

¶ 10 The circuit court dismissed the Krops’ counterclaims under section 2-619 of the
Code. Relying on Hoover v. Country Mutual Insurance Co., 2012 IL App (1st)
110939, the court found that the two-year limitations period for claims against
insurance producers begins as soon as the insurer issues the policy. It rejected the
Krops’ argument that they could not have known about the defect in their policy,
reasoning instead that insurance customers have an obligation to read their policies
and understand the terms. Because American Family issued the Krops’ policy on
March 21, 2012, the court concluded that all claims after March 21, 2014, were
untimely. The Krops filed their counterclaims and third-party complaint on
September 22, 2015, so the circuit court granted Varga’s and American Family’s
motions to dismiss.

¶ 11 The appellate court reversed the dismissal. 2017 IL App (1st) 161071. It stated
that other Illinois cases have distinguished between lawsuits alleging negligence by
an insurer, like American Family, and those alleging negligence by an agent, like
Varga. Id. ¶ 34 (citing Perelman v. Fisher, 298 Ill. App. 3d 1007 (1998)). Based on
those decisions, the appellate court found that insurance agents owe their customers
a fiduciary duty and that this duty is more significant than the customers’ obligation
to read their policy. The court concluded that the limitations period did not begin to
run when the policy was issued in March 2012. Instead, the “discovery rule”
delayed the start of the limitations period until the Krops knew or should have
known of the injury. Finally, the court found that the Krops reasonably should have
known of the injury only when American Family denied them coverage in August
2014 and that the Krops’ claims in September 2015 were timely. Id. ¶ 36. Varga

-4-
 petitioned this court for leave to appeal.1 We allowed Varga’s petition. Ill. S. Ct. R.
315(a) (eff. Mar. 15, 2016).

¶ 12 ANALYSIS

¶ 13 The circuit court granted Varga’s section 2-619 motion, and we review a
dismissal under section 2-619 de novo. Kean v. Wal-Mart Stores, Inc., 235 Ill. 2d
351, 361 (2009). A section 2-619 motion admits the legal sufficiency of the
complaint but asserts another affirmative matter that defeats the claim. King v. First
Capital Financial Services Corp., 215 Ill. 2d 1, 12 (2005). Section 2-619(a)(5)
authorizes a court to dismiss a complaint that was filed outside of the relevant
limitations period. 735 ILCS 5/2-619(a)(5) (West 2014). When reviewing a
dismissal under section 2-619, this court will affirm only if there is no genuine issue
of material fact and the movant is entitled to judgment as a matter of law. Kedzie &
103rd Currency Exchange, Inc. v. Hodge, 156 Ill. 2d 112, 116-17 (1993). It also
admits as true all well-pleaded facts and all reasonable inferences that can be drawn
from them. Porter v. Decatur Memorial Hospital, 227 Ill. 2d 343, 352 (2008). We
construe those facts in the light most favorable to the nonmoving party. Id.

¶ 14 A. Earliest Accrual Date for Negligent Failure to Procure Insurance

¶ 15 The Krops’ suit is premised on Varga’s alleged failure to satisfy his statutory
obligation in procuring an American Family insurance contract for the Krops.
Section 2-2201(a) of the Code states that “[a]n insurance producer, registered firm,
and limited insurance representative shall exercise ordinary care and skill in
renewing, procuring, binding, or placing the coverage requested by the insured or
proposed insured.” 735 ILCS 5/2-2201(a) (West 2014). The section does not define
“insurance producer,” but we have held that this term includes “captive agents” like
Varga, who represent a particular insurance company and sell that company’s
policies to customers. Skaperdas v. Country Casualty Insurance Co., 2015 IL
117021, ¶¶ 19, 23. The Krops alleged that Varga breached the insurance producer’s
duty of ordinary care.

1
American Family subsequently moved to join and adopt Varga’s petition for leave to appeal,
his appellate brief, and his reply brief before this court, all of which we allowed.

-5-
¶ 16 Section 13-214.4 of the Code is the statute of limitations for such claims. It
provides that:

“All 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).

¶ 17 Although this statute clearly bars a claim under section 2-2201(a) filed more
than two years after the cause of action accrues, it does not define what constitutes
accrual. To fill this gap, this court has explained that, for tort claims,

“the cause of action usually accrues when the plaintiff suffers injury.
[Citations.] For contract actions and torts arising out of contractual
relationships, though, the cause of action ordinarily accrues at the time of the
breach of contract, not when a party sustains damages. [Citations.] The reason
for this distinction is the concern that plaintiffs will delay bringing suit after a
contract is breached in order to increase damages.” Hermitage Corp. v.
Contractors Adjustment Co., 166 Ill. 2d 72, 77 (1995).

¶ 18 Illinois courts have typically treated allegations of negligence in relation to
insurance policies, such as the negligent procurement claim here, as torts arising
out of contractual relationships. See, e.g., Hoover, 2012 IL App (1st) 110939, ¶ 52;
State Farm Fire & Casualty Co. v. John J. Rickhoff Sheet Metal Co., 394 Ill. App.
3d 548, 565 (2009); Indiana Insurance Co. v. Machon & Machon, Inc., 324 Ill.
App. 3d 300, 303-04 (2001). In Kanter v. Deitelbaum, 271 Ill. App. 3d 750, 755
(1995), the appellate court characterized this cause of action as “extracontractual.”
Unlike other torts, the earliest date of accrual for torts arising out of contractual
relationships is the date of the breach of the duty or the contract, not the date of the
damages. Indiana Insurance Co., 324 Ill. App. 3d at 304; Hoover, 2012 IL App
(1st) 110939, ¶ 52; see also Hermitage Corp., 166 Ill. 2d at 77.

¶ 19 Here the date of the alleged breach was March 21, 2012. On this day Varga
procured for the Krops an insurance policy that did not cover defamation, invasion
of privacy, and intentional infliction of emotional distress, which the Krops alleged

-6-
 they had asked Varga to provide.

¶ 20 B. The Discovery Rule

¶ 21 The Krops urge the court to apply the “discovery rule.” This rule delays the start
of the limitations period until the claimant knew or reasonably should have known
of the injury and that the injury was wrongfully caused. Hermitage Corp., 166 Ill.
2d at 77; Knox College v. Celotex Corp., 88 Ill. 2d 407, 414 (1981). Illinois courts
have applied this rule in certain circumstances to alleviate the harsh consequences
of statutes of limitations. Knox College, 88 Ill. 2d at 414. When a complainant
should have discovered an injury is a question of fact, but this court can determine
when the limitations period began if the facts are undisputed and only one answer is
reasonable. Jackson Jordan, Inc. v. Leydig, Voit & Mayer, 158 Ill. 2d 240, 250
(1994).

¶ 22 Many Illinois cases have found that insurance customers should know the
specifics of their policy as soon as they purchase it. The appellate court has
imposed on insurance customers an obligation to read their policies and understand
the terms. See, e.g., RVP, LLC v. Advantage Insurance Services, Inc., 2017 IL App
(3d) 160276, ¶ 32; Garrick v. Mesirow Financial Holdings, Inc., 2013 IL App (1st)
122228, ¶ 49; Perelman, 298 Ill. App. 3d at 1011. In Hoover, 2012 IL App (1st)
110939, the appellate court concluded that the plaintiffs should have known the
specifics of their policy when they first purchased it. The Hoovers had met with
their insurance agent about adding a section to their existing policy that would
cover the cost to replace their home and possessions if they were damaged. After an
explosion destroyed their home, the insurer covered less than 80% of the
replacement costs because the new section in the Hoovers’ policy specified this
liability limit. Id. ¶ 17. When the Hoovers sued for negligence, the insurer claimed
that the Hoovers should have known about the liability limit more than two years
earlier and the suit was untimely. The court agreed with the insurer that the Hoovers
could have read the policy and known about the liability limit as soon as they
received the new policy. Id. ¶ 60.

¶ 23 The Krops ask this court to disregard these precedents and follow the appellate
court’s reasoning. The appellate court here applied the discovery rule and delayed
the start of the limitations period. Krop, 2017 IL App (1st) 161071, ¶ 16. It cited

-7-
 two appellate court cases addressing the statute of limitations for negligent failure
to procure insurance: Broadnax v. Morrow, 326 Ill. App. 3d 1074 (2002), and
Perelman, 298 Ill. App. 3d 1007. Krop, 2017 IL App (1st) 161071, ¶¶ 16, 20. In
each of these cases, an insurance customer sued an insurance broker claiming
negligent failure to procure the requested insurance policy. Unlike “captive agents”
who work for one insurance company exclusively, insurance brokers work for their
customers and provide insurance policies from multiple companies. Skaperdas,
2015 IL 117021, ¶ 19. The Broadnax and Perelman courts found that insurance
brokers owed customers a fiduciary duty. This duty exists in certain relationships
where “one party places trust in another so that the latter gains superiority and
influence over the former.” Prime Leasing, Inc. v. Kendig, 332 Ill. App. 3d 300,
313 (2002). In both Broadnax and Perelman, the appellate court found that this
fiduciary duty imposed a greater obligation on insurance brokers to ensure that
their customers understood the specifics of their new policies. Broadnax, 326 Ill.
App. 3d at 1079; Perelman, 298 Ill. App. 3d at 1011.

¶ 24 Following Broadnax and Perelman, the appellate court concluded that barring a
negligence claim against any insurance producer regardless of when the customer
discovered the injury would be inconsistent with the fiduciary duty. 2017 IL App
(1st) 161071, ¶¶ 16, 20, 34-35. It applied the discovery rule to delay the start of the
limitations period until the Krops learned of the injury and that it was wrongfully
caused, which it determined was when American Family denied the Krops
coverage in August 2014. Id. ¶ 35.

¶ 25 In addition to Broadnax and Perelman, the Krops and the appellate court relied
on Scottsdale Insurance Co. v. Lakeside Community Committee, 2016 IL App (1st)
141845. In Scottsdale, the appellate court found that the cause of action accrued
when the insurer first denied coverage and not when the insured first purchased the
policy. Id. ¶ 2. Scottsdale arose after a young child died while Lakeside
Community Committee (Lakeside) was providing child welfare services to the
child and her mother. Id. ¶ 1. When the public guardian sued Lakeside for wrongful
death, Lakeside’s insurer, Scottsdale, denied coverage. Id. ¶ 2. Lakeside assigned
its own claims to the public guardian, which alleged that Scottsdale’s agent
negligently failed to procure the insurance policy that Lakeside had requested. Id.
In rejecting Scottsdale’s argument that the statute of limitations barred the claim,

-8-
 the appellate court agreed with Broadnax that Lakeside would not have known the
extent of its coverage until the insurer denied coverage. Id. ¶¶ 31, 36, 38.

¶ 26 The Krops’ reliance on Broadnax and Perelman is misplaced. See also id.
¶¶ 29-31, 38; State Farm Fire & Casualty Co., 394 Ill. App. 3d at 565-66; General
Casualty Co. of Illinois v. Carroll Tiling Service, Inc., 342 Ill. App. 3d 883,
899-900 (2003). The court in Broadnax based its decision on the insurance broker’s
fiduciary duty, but insurance agents do not owe customers a fiduciary duty. At the
time of the facts in Broadnax and Perelman, such a duty existed for insurance
brokers, who procured policies for customers but did not work for any one
insurance company. Skaperdas, 2015 IL 117021 ¶¶ 19, 22; Broadnax, 326 Ill. App.
3d at 1079; Perelman, 298 Ill. App. 3d at 1011. In contrast, insurance agents
worked for a particular company and owed obligations to their employer as well as
their customer. Skaperdas, 2015 IL 117021, ¶¶ 19, 22.

¶ 27 In 1997, the General Assembly enacted the Insurance Placement Liability Act.
Section 2-2201 provides:

“No cause of action brought by any person or entity against any insurance
producer, registered firm, or limited insurance representative concerning the
sale, placement, procurement, renewal, binding, cancellation of, or failure to
procure any policy of insurance shall subject the insurance producer, registered
firm, or limited insurance representative to civil liability under standards
governing the conduct of a fiduciary or a fiduciary relationship except when the
conduct upon which the cause of action is based involves the wrongful
retention or misappropriation by the insurance producer, registered firm, or
limited insurance representative of any money that was received as premiums,
as a premium deposit, or as payment of a claim.” Pub. Act 82-280 (eff. Jan. 1,
1997) (enacting 735 ILCS 5/2-2201(b)).

¶ 28 This statute prevents any insurance producer from being held to the fiduciary
standard, except in a narrow set of circumstances not relevant to this case. 735
ILCS 5/2-2201(b) (West 2014). Instead insurance producers have only a general
duty to exercise ordinary care. Id. § 2-2201(a). In Skaperdas, this court held that the
general duty applies to both agents and brokers. 2015 IL 117021, ¶¶ 35, 37. This
statute makes clear that Varga owed no fiduciary obligations to the Krops.

-9-
¶ 29 Because a claim for negligent failure to procure insurance does not involve a
fiduciary duty, insurance customers’ obligation to read their policies controls. See
RVP, LLC, 2017 IL App (3d) 160276, ¶ 32; Hoover, 2012 IL App (1st) 110939,
¶ 60. Customers generally know their own goals better than their insurance agent
does, but determining if a policy achieves those goals will be difficult when
customers do not read the policy. Expecting customers to read their policies and
understand the terms incentivizes them to act in good faith to purchase the policy
they actually want, rather than to delay raising an issue until after the insurer has
already denied coverage. See Hermitage Corp., 166 Ill. 2d at 77 (noting that cause
of action for contract actions accrues at moment of breach, not injury). Moreover,
insurance customers frequently maintain the same insurance policy for years,
perhaps decades, at a time. If the cause of action did not accrue until the insurance
producer notified the customer of an uninsured liability, insurance customers
would benefit from their policy throughout the intervening period, while evidence
potentially relevant to the insurer’s defense would be at risk of deterioration.
Therefore, because insurance customers can read their policies and learn of any
defects, the discovery rule typically will not delay the start of the two-year
limitations period for negligent failure to procure insurance.

¶ 30 Decisions of other state supreme courts support this conclusion. The Rhode
Island, Indiana, Mississippi, Delaware, and Maine Supreme Courts have agreed
that insurance customers can learn the extent of their coverage by reading their
policies. Faber v. McVay, 155 A.3d 153, 158 (R.I. 2017); Groce v. American
Family Mutual Insurance Co., 5 N.E.3d 1154 (Ind. 2014); Filip v. Block, 879
N.E.2d 1076, 1084 (Ind. 2008); Oaks v. Sellers, 2006-IA-00005-SCT (¶ 23) (Miss.
2007); Kaufman v. C.L. McCabe & Sons, Inc., 603 A.2d 831, 835 (Del. 1995);
Chiapetta v. Clark Associates, 521 A.2d 697, 700 (Me. 1987).

¶ 31 Admittedly, the courts of other states are far from unanimous on when the cause
of action accrues in such cases and when insurance customers should discover their
potential claims. See Stephens v. Worden Insurance Agency, LLC, 859 N.W.2d
723, 732-33 (Mich. Ct. App. 2014) (cataloguing different approaches to the accrual
date); M.S.S. Construction Corp. v. Century Surety Co., No. 15 Civ. 2801(ER),
2015 WL 6516861, at *12 (S.D.N.Y. Oct. 28, 2015) (discussing conflict within
New York state courts over whether the cause of action accrued at the time of the
breach or when the insurer first denied coverage).

- 10 -
¶ 32 A few courts have taken the Krops’ position that the discovery rule delays the
limitations period until after the insurance customers learn that they have incurred
expenses from an uninsured liability. Gudenau & Co. v. Sweeney Insurance, Inc.,
736 P.2d 763, 767 (Alaska 1987); International Mobiles Corp. v. Corroon &
Black/Fairfield & Ellis, Inc., 560 N.E. 2d 122, 124 (Mass. App. Ct. 1990);
American Home Assurance Co. v. Osborn, 422 A.2d 8, 16 (Md. Ct. Spec. App.
1980); Kelly v. H.C. Kerstetter Co., No. 696 MDA 2015, 2016 WL 1728686, at
*4-5 (Pa. Super. Ct., Apr. 27, 2016).

¶ 33 Some state courts also have found that the cause of action accrues when the
insured incurs losses because of an uninsured liability, but they reached this
conclusion without applying a discovery rule. See, e.g., Blumberg v. USAA
Casualty Insurance Co., 790 So. 2d 1061, 1065 (Fla. 2001); Hickox v. Stover, 551
So. 2d 259, 264 (Ala. 1989); Chiapetta, 521 A.2d at 700; Spurlin v. Paul Brown
Agency, Inc., 454 P.2d 963 (N.M. 1969); see also, LGR Realty, Inc. v. Frank &
London Insurance Agency, 152 Ohio St. 3d 517, 2018-Ohio-334, 98 N.E.3d 241,
¶ 40 (DeWine, J., concurring, joined by O’Connor, C.J.) (discussing ambiguities in
Ohio law but noting Ohio cases holding that the discovery rule does not apply in
any professional negligence suit); Johnson & Higgins of Texas, Inc. v. Kenneco
Energy, Inc., 962 S.W.2d 507, 514-15 (Tex. 1998). But cf. Rice v. Louis A.
Williams & Associates, Inc., 86 S.W.3d 329, 339-40 (Tex. Ct. App. 2002).

¶ 34 These courts relied on two key premises: that the injury for which the plaintiffs
sought a remedy was a liability that their policy did not cover and that the plaintiffs
could not assert their claim until they encountered such a liability. See, e.g.,
Gudenau & Co., 736 P.2d at 766; Kelly, 2016 WL 1728686, at *4; American Home
Assurance Co., 422 A.2d at 16 (explaining that the cause of action cannot accrue
until there is some “legal harm”). The Alaska Supreme Court’s decision in Austin v.
Fulton Insurance Co., 444 P.2d 536 (Alaska 1968), is characteristic of this
approach. Austin explained that the cause of action for a tort cannot accrue until the
tort is complete, that the tort is not complete until the harm occurs, and that the
relevant harm was the uninsured liability, not simply the defective policy. Id. at
539. This was the background context to which the Alaska Supreme Court applied
the discovery rule in Gudenau & Co., 736 P.2d at 766; see also Pichowicz v.
Watson Insurance Agency Inc., 768 A.2d 1048 (N.H. 2001); International Mobiles

- 11 -
 Corp., 560 N.E.2d at 124; Williams v. Hilb, Rogal & Hobbs Insurance Services of
California, Inc., 98 Cal. Rptr. 3d 910, 924 (Ct. App. 2009).

¶ 35 We reject these premises and instead agree with the Indiana and Delaware
courts. Filip, 879 N.E.2d at 1076; Kaufman, 603 A.2d at 834. Because Illinois
treats negligent failure to procure insurance as a tort arising out of a contract, “the
cause of action ordinarily accrues at the time of the breach of contract, not when a
party sustains damages.” Hermitage Corp., 166 Ill. 2d at 77. Neither party disputes
that the breach occurred when Varga delivered the allegedly nonconforming
policy. See Easterly v. Metropolitan Life Insurance Co., No.
2006-CA-001580-MR, 2009 WL 350595, at *6 (Ky. Ct. App. Feb. 13, 2009).
Although the discovery rule delays the start of the limitations period until the
plaintiff should discover the injury, we find that insurance customers are injured as
soon as an insurance producer delivers a policy that does not conform to the
customers’ request. The Krops’ alleged injuries included not only their uninsured
liability in Andreolas’s lawsuit but also their lack of coverage between the purchase
of the policy in 2012 and the lawsuit in 2014. The damages may have increased
when Andreolas sued, but the alleged injury began when American Family and
Varga provided the Krops with an insurance policy that did not conform to their
request. Filip, 879 N.E.2d at 1083; Kaufman, 603 A.2d at 834; see also Restatement
(Second) of Torts § 7 (1965) (distinguishing between a “harm,” which requires a
loss or detriment, and the broader “injury,” which may exist without any harm
occurring); Nolan v. Johns-Manville Asbestos, 85 Ill. 2d 161, 171 (1981). The
cause of action accrues as soon as the plaintiff should discover some injury, even if
the full extent of the injury is not evident. Golla v. General Motors Corp., 167 Ill.
2d 353, 364, 367 (1995).

¶ 36 Although customers should read their policy and discover any defects, we
recognize that there will be a narrow set of cases in which the policyholder
reasonably could not be expected to learn the extent of coverage simply by reading
the policy. In some cases the insurance policies may contain contradictory
provisions or fail to define key terms. In others the circumstances that give rise to
the liability may be so unexpected that the typical customer should not be expected
to anticipate how the policy applies. For example, the highly unusual circumstances
of Scottsdale, involving the murder of a young child in the custody of the
Department of Children and Family Services, were not likely imagined by

- 12 -
 Lakeside when it purchased the policy.2 Scottsdale, 2016 IL App (1st) 141845,
¶¶ 36-37; see also Groce, 5 N.E.3d at 1159 (finding that although “ ‘reasonable
reliance upon an agent’s representations can override an insured’s duty to read the
policy,’ ” the insurance agent’s statement that he would have the agreement
“ ‘written up’ ” was not a sufficient representation to absolve the customers of the
obligation to read their own policy (quoting Fillip, 879 N.E. 2d at 1084)).

¶ 37 The alleged facts of this case do not present such an exceptional circumstance
where a customer reasonably should not be expected to understand the terms of the
policy. The American Family policy covered legal liability only if it resulted from
“bodily injury or property damage.” The first page of the policy includes a
“DEFINITIONS” section that explicitly states that “[b]odily [i]njury does 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.” This clearly
differs from the Travelers policy, which states that Travelers would provide
coverage “for damages because of ‘bodily injury,’ ‘personal injury,’ or ‘property
damage.’ ” The Travelers policy defines “personal injury” to include “[l]ibel,
slander or defamation of character” and “[i]nvasion of privacy.” The difference
between the two policies was apparent. These details closely resemble the facts of
Hoover, where the 80% liability limit was clearly expressed on the face of the
policy. Hoover, 2012 IL App (1st) 110939, ¶¶ 58-61.

¶ 38 The Krops have not pleaded facts showing that they could not have read their
American Family policy and understood its terms, so the cause of action accrued
when they first purchased their policy. The parties agree that American Family
issued the policy on March 21, 2012.3 The Krops do not claim that they never
received the policy or had no copy available to them. Because they were obligated
to read the policy and understand its terms, this is also the earliest date when they

2
Although the Scottsdale court erred by relying on Broadnax, its reasoning based on Indiana
Insurance Co. and for distinguishing Hoover remains persuasive. Scottsdale, 2016 IL App (1st)
141845, ¶¶ 36-37.
3
The exact date that the Krops received a copy of the American Family policy does not appear
in the record. However, the Krops do not dispute March 21, 2012, as the date that American Family
issued the policy, and they do not suggest that they received a copy much later. Even if March 21,
2012, is not the exact date that they had the opportunity to read the policy, they had the opportunity
soon after. Whatever exact date the cause of action accrued in spring 2012, the suit in September
2015 was certainly more than two years after that date.

- 13 -
 reasonably should have known that Varga had not provided them with an American
Family policy that covered all the same liabilities as the Travelers policy. Their
cause of action against Varga for negligent failure to procure insurance accrued on
March 21, 2012, and the two-year limitations period ended on March 21, 2014.
Because the Krops brought their claim on September 3, 2015, that claim was
untimely.

¶ 39 CONCLUSION

¶ 40 The Krops’ claim was barred by the limitations period for claims against
insurance producers in section 13-214.4 of the Code. We reverse the appellate
court’s decision and affirm the circuit court’s order granting Varga’s and American
Family’s motions to dismiss under section 2-619 of the Code.

¶ 41 Appellate court judgment reversed.

¶ 42 Circuit court judgment affirmed.

¶ 43 JUSTICE THEIS, dissenting:

¶ 44 The threshold question in this case is the proper characterization of the
third-party action filed by the Krops against Andrew Varga, an American Family
agent, under section 2-2201 of the Code (735 ILCS 5/2-2201 (West 2014)). When
this action is properly characterized as a negligence action, it is evident that the
cause of action accrued upon American Family’s denial of the Krops’ claim for
coverage. Thus, when the Krops filed their third-party complaint for negligent
procurement, the two-year limitations period had not run. Accordingly, I would
affirm the appellate court’s judgment that reversed the trial court’s dismissal of the
Krops’ cause of action as untimely.

¶ 45 The two-year statute of limitations in section 13-214.4 of the Code
encompasses claims by an insured against an insurance producer, including Varga.
That section 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 ***
concerning the *** procurement *** of, or failure to procure any policy of

- 14 -
 insurance shall be brought within 2 years of the date the cause of action accrues.”
735 ILCS 5/13-214.4 (West 2014).

¶ 46 The accrual date depends upon how the cause of action is characterized.
Historically, liability for the failure to procure insurance arose under various
theories of tort and contract, and it often depended on the distinctions between
insurance brokers and captive insurance agents. In these cases, depending upon the
relationship, liability was said to be based on the agreement between the
prospective insured and the insurance broker to procure a certain policy, based on a
fiduciary relationship with its principal, or based on other negligence principles.
See, e.g., Scarsdale Villas Associates, Ltd. v. Korman Associates Insurance
Agency, Inc., 178 Ill. App. 3d 261, 264 (1988) (action for breach of a contract to
procure insurance and negligent misrepresentation); Gothberg v. Nemerovski, 58
Ill. App. 2d 372 (1965) (action for breach of a contract to procure); Black v. Illinois
Fair Plan Ass’n, 87 Ill. App. 3d 1106, 1110 (1980) (action for negligent
procurement arising from a breach of fiduciary duties); Talbot v. Country Life
Insurance Co., 8 Ill. App. 3d 1062, 1065 (1973) (action for negligent procurement
based on an affirmative undertaking to perform a service to another to either
provide the desired coverage or notify the applicant of the rejection of the risk “so
that he may not be lulled into a feeling of security or put to prejudicial delay in
seeking protection elsewhere”).

¶ 47 In 1996, the General Assembly enacted section 2-2201 of the Code, which
addressed the liability of insurance producers in relation to the procurement of
insurance. See Pub. Act 89-638, § 5 (eff. Jan. 1, 1997) (adding 735 ILCS 5/2-2201).
Section 2-2201(a) imposes negligence liability on an insurance producer, including
both brokers and captive agents, by imposing a duty to “exercise ordinary care and
skill in renewing, procuring, binding, or placing the coverage requested by the
insured or proposed insured.” 735 ILCS 5/2-2201(a) (West 2014); Skaperdas v.
Country Casualty Insurance Co., 2015 IL 117021, ¶ 25. Although the statute
removed the common-law basis for distinguishing between insurance brokers and
insurance agents, and limited the scope of breach of fiduciary duty claims, the
statute does not release an insurance producer from liability for negligence (735
ILCS 5/2-2201(d) (West 2014)), and subsection (a) specifically provides for a
cause of action in negligence (id. § 2-2201(a)); Skaperdas, 2015 IL 117021, ¶ 24.

- 15 -
¶ 48 Here, the Krops alleged that Varga was negligent in failing to procure the
insurance coverage that they requested pursuant to section 2-2201 of the Code. As
we explained in Skaperdas, the statutory duty of ordinary care arising from
subsection (a) arises once coverage is “ ‘requested by the insured or proposed
insured.’ ” Skaperdas, 2015 IL 117021, ¶¶ 37, 42 (quoting 735 ILCS 5/2-2201(a)
(West 2010)). Once such coverage is requested, insurance producers “exercise
ordinary care and skill in responding to the request, ‘either by providing the
desirable coverage or by notifying the applicant of the rejection of the risk.’ ” Id.
¶ 37 (quoting Talbot, 8 Ill. App. 3d at 1065). If an insurance producer cannot offer
the coverage requested, it may satisfy the statutory duty by notifying the customer
to look elsewhere for the requested coverage. Id. ¶ 39. We further explained in
Skaperdas that the duty does not depend upon either a contractual relationship or a
fiduciary one. Id. ¶¶ 25-26.

¶ 49 As a result, where the statute specifically provides for a negligence action, the
duty as defined in section 2-2201(a) does not depend upon any contractual
relationship, and the Krops do not seek recovery for mere negligent performance of
a contractual duty, the proper characterization of their claim is an ordinary
negligence action, which is a tort-based claim. See, e.g., Melrose Park Sundries,
Inc. v. Carlini, 399 Ill. App. 3d 915, 919 (2010) (characterizing and analyzing the
claim against an insurance producer under section 2-2201 as a negligence action);
Mercola v. Abdou, 223 F. Supp. 3d 720, 728-29 (N.D. Ill. 2016) (finding that the
provisions of section 2-2201 sound in the language of tort).

¶ 50 Next, we must consider when a cause of action accrues for a negligence claim.
Generally, we have recognized that tort actions have been treated differently than
contract actions. Hermitage Corp. v. Contractors Adjustment Co., 166 Ill. 2d 72, 77
(1995). Tort actions generally accrue at the time of injury. Id. (citing West
American Insurance Co. v. Sal E. Lobianco & Son Co., 69 Ill. 2d 126, 132 (1977)).
In Khan v. Deutsche Bank AG, 2012 IL 112219, ¶ 20, this court explained that a
cause of action “accrues” when “facts exist that authorize the bringing of a cause of
action. “Thus, a tort cause of action accrues when all of its elements are present,
i.e., duty, breach, and resulting injury or damage.” Id. (citing Brucker v. Mercola,
227 Ill. 2d 502, 542 (2007)); see also Sundance Homes, Inc. v. County of Du Page,
195 Ill. 2d 257, 266 (2001) (statute of limitations begins to run when the plaintiff
“has the right to invoke the aid of the court to enforce his remedy”); Lobianco, 69

- 16 -
 Ill. 2d at 129-30 (cause of action based on tort accrues only when all the elements
are present: duty, breach, and resulting injury or damage.)

¶ 51 Pursuant to our discovery rule, the limitations period is tolled and begins to
commence when the plaintiff knew, or reasonably should have known, that the
injury occurred and that it was wrongfully caused. Knox College v. Celotex Corp.,
88 Ill. 2d 407, 414 (1981). At that point, the injured person possesses sufficient
information concerning his injury and its cause to put a reasonable person on notice
to make additional inquiries. Id. at 415. Neither party disputes the applicability of
the discovery rule to this cause of action.

¶ 52 Thus, as applied in this context, before the tort could become actionable and
before the limitations period could begin to run, there must be an injury to the
plaintiff as a consequence of the insurance producer’s alleged negligence that could
serve as a basis for the recovery of damages. The alleged injury arises when the
plaintiff sustains a loss for which an insurance claim is not covered but would have
been covered if the requested insurance had been properly procured or if the
plaintiff had been timely notified of the rejection of the risk. Under the discovery
rule, in this case, at the time the Krops received the denial of coverage letter from
American Family in August 2014, they knew or should have known of their injury
and that Varga might have been negligent.

¶ 53 Although the Krops were not required to know the “full extent” of the injury
before the statute of limitations was triggered (Golla v. General Motors Corp., 167
Ill. 2d 353, 364 (1995)), prior to the denial of coverage, any injury was purely
contingent and speculative. See, e.g., Stephens v. Worden Insurance Agency, LLC,
859 N.W.2d 723, 733-34 (Mich. Ct. App. 2014) (negligent procurement claim
accrues when the insurer denies the insured’s claim because “on that date any
speculative injury becomes certain, and the elements of the negligence action are
complete”); International Mobiles Corp. v. Corroon & Black/Fairfield & Ellis,
Inc., 560 N.E.2d 122, 124 (Mass. App. Ct. 1990) (“[i]f no accident produces a
claim, the failure will have been negligence in the abstract”); see also Austin v.
Fulton Insurance Co., 444 P.2d 536, 539 (Ala. 1968) (until there was a loss for
which the plaintiff was not protected, no legally protected interest had been
invaded).

- 17 -
¶ 54 Accordingly, taking the allegations of the complaint in the light most favorable
to the Krops, as required under section 2-619 of the Code (Porter v. Decatur
Memorial Hospital, 227 Ill. 2d 343, 352 (2008)), their cause of action accrued in
August 2014, when their claim for coverage under their homeowner’s insurance
policy was denied. When they filed their third-party complaint in September 2015,
the two-year limitations period had not yet run.

¶ 55 Instead of applying these well-settled accrual principles in negligence actions,
the majority applies accrual theories relating to contracts and “torts arising out of
contractual relationships” to conclude that the Krops’ cause of action accrued at the
time of the breach. Supra ¶¶ 17-18, 35. To support this theory, the majority relies
primarily on a series of cases involving causes of action against insurance
producers, including Hoover v. Country Mutual Insurance Co., 2012 IL App (1st)
110939, ¶ 52; State Farm Fire & Casualty Co. v. John J. Rickhoff Sheet Metal Co.,
394 Ill. App. 3d 548, 565 (2009); and Indiana Insurance Co. v. Machon & Machon,
Inc., 324 Ill. App. 3d 300, 303-04 (2001).

¶ 56 Although those cases indeed use this hybrid term of a “tort arising out of a
contractual relationship,” like the majority, none of these cases explain the
doctrinal underpinnings of such a cause of action or explain the contours of these
types of hybrid claims in the context of section 2-2201. The Hoover and State Farm
cases rely on the Machon case. Machon involved a contractual relationship
between an insurer and its agent. Machon, in turn, relies primarily on Lobianco, 69
Ill. 2d 126. Lobianco was not a case involving insurance producers or the negligent
procurement of insurance. Lobianco relies, in turn, on the nineteenth-century case
of Pennsylvania Co. v. Chicago, Milwaukee & St. Paul Ry. Co., 144 Ill. 197 (1893),
involving common carriers for hire and their negligent conduct in transporting
certain goods. Additionally, the majority relies on Hermitage Corp., 166 Ill. 2d at
77, where this court relied on Lobianco, in a case where the parties agreed that a
negligence claim arose out of a breach of an oral contract, in considering the
five-year statute of limitations on unwritten contracts. The majority fails to
recognize that none of these cases inform our analysis here.

¶ 57 Significantly, the majority never identifies a contract from which this
negligence action arises. The majority does not suggest that the contract at issue is

- 18 -
 the insurance policy itself. Nor has it identified any conduct that would constitute a
contract.

¶ 58 Furthermore, neither the majority opinion nor the cases it relies upon explain
how applying this hybrid cause of action and contract accrual principles would
survive the economic loss doctrine in this context. In Moorman Manufacturing Co.
v. National Tank Co., 91 Ill. 2d 69, 86 (1982), this court held that generally a
plaintiff cannot recover in tort for solely economic losses, limiting recovery to
contract damages. This doctrine has been applied to liability premised on the mere
negligent performance of a contractual obligation where the duty is defined by the
contract executed with the client. See 2314 Lincoln Park West Condominium Ass’n
v. Mann, Gin, Ebel & Frazier, Ltd., 136 Ill. 2d 302, 317 (1990). However, we have
explained that, where the duties owed arise outside of the contract, the plaintiff may
seek recovery in tort for breach of those independent duties. Congregation of the
Passion, Holy Cross Province v. Touche Ross & Co., 159 Ill. 2d 137, 162 (1994).
The majority has made no effort to fit this hybrid cause of action and its application
of contract accrual principles into any exception to the economic loss doctrine.

¶ 59 With no attempt by the case law to explain why contract accrual principles
apply to a negligent procurement claim under section 2-2201, it appears that prior
cases chose this analytical framework on purely public policy grounds. Hermitage,
for example, expressed the “concern that plaintiffs will delay bringing suit after a
contract is breached in order to increase damages.” Hermitage, 166 Ill. 2d at 77.
However, in adopting section 2-2201(a), the legislature has expressed the public
policy of this state to be that insurance producers, whether brokers or captive
agents, have a duty of ordinary care and that liability rests in negligence principles,
allowing recovery in tort. 735 ILCS 5/2-2201(d) (West 2014) (“the provisions of
this [s]ection do not limit or release an insurance producer *** from liability for
negligence concerning the *** procurement *** or failure to procure any policy of
insurance”).

¶ 60 As a matter of statutory interpretation, we must construe the language as written
without reading into it exceptions, limitations, or conditions the legislature did not
express. Moon v. Rhode, 2016 IL 119572, ¶ 22. Nothing in the language of section
2-2201 suggests that the cause of action is a “tort arising out of a contractual
relationship” or implicates contract theories. We cannot read these contract ideas

- 19 -
 into the plain language of the statute. Indeed, we explained in Skaperdas that the
duties owed under section 2-2201 do not depend upon any contract. Skaperdas,
2015 IL 117021, ¶ 25. Nor can we add language to the statute of limitations as
provided in section 13-214.4. Nothing in the language of that section suggests that
the legislature meant to incorporate contract accrual principles. 735 ILCS
5/13-214.4 (West 2014).

¶ 61 The suspect logic in the majority’s opinion is laid bare by its reliance on
Hermitage. Recognizing that the statute of limitations does not define what
constitutes accrual, the majority relies on Hermitage as authority to “fill this gap”
in the statute. Supra ¶ 17. The language quoted from Hermitage is accurate but
ignores the context.

¶ 62 The Hermitage case involved a claim by a mechanic’s lienholder who sued the
preparer of the lien for negligence, negligent and unauthorized practice of law,
consumer fraud, and breach of warranty. Hermitage, 166 Ill. 2d at 75-76. The
parties agreed that these common-law theories, other than fraud, arose from an oral
contract for services to which a five year statute of limitations applied. Id. at 76.
The causes of action were not based on any statute.

¶ 63 Unlike Hermitage, in this case, there is no gap to be filled. Section 2-2201
simply articulates a cause of action for negligence. Under the statute, the Krops
presented a cause of action for negligence, and the statute of limitations for that
claim was triggered by normal negligence accrual principles.

¶ 64 Furthermore, the majority concludes that the discovery rule will typically not
delay the accrual period because an insurance customer’s duty to read the policy
generally acts to put the customer on notice of the injury. This conclusion is
premised on the erroneous notion that the injury accrues when the plaintiff is issued
a policy that does not cover all of the possible contingent future liability that would
have been covered under the requested policy. As explained, the breach itself is not
actionable. No negligent procurement action could arise until there was a loss for
which an insurance claim was made and denied because, until that moment, there
could be no actual damages.

¶ 65 Although the accrual issue has received diverse treatment in other jurisdictions,
to hold that the date the injury accrues is the date of the negligent act allows the

- 20 -
 cause of action to be barred before any actionable injury resulted. If plaintiffs had
brought suit in 2012 when they received the allegedly defective policy, their
complaint would not have survived a section 2-615 motion to dismiss because no
actual damages had yet occurred. Under the majority’s view, the cause of action for
negligent procurement by an insurance producer under section 2-2201 is essentially
a dead letter if the underlying liability claim is not brought within two years from
the date the policy was issued.

¶ 66 Under these circumstances, the statute of limitations essentially becomes a
statute of repose, contrary to the legislative intent of section 13-214.4. 735 ILCS
5/13-214.4 (West 2014). Had the legislature sought this outcome, it could have
drafted the statute of limitations to expressly state that a cause of action concerning
an insurance producer’s procurement of insurance shall be brought within two
years of the date the policy of insurance was issued. It did not do so.

¶ 67 Whether a corresponding duty to read the policy may be alleged as an
affirmative defense to a claim for negligent procurement is a separate question,
involving the merits of plaintiffs’ cause of action. However, the majority’s
conclusion eviscerates the duty of the insurance producer to notify a prospective
insured of the rejection of the risk. Skaperdas, 2015 IL 117021, ¶ 37. Moreover,
whether the deficiencies in a policy are readily apparent from reading it may
involve questions for the trier of fact, including the sophistication of the insured
and the complexity of the policy. These questions, however, are not at issue here on
a motion to dismiss.

¶ 68 In sum, this is a tort action and should be analyzed under the proper tort
framework. Interpreting the cause of action in this manner effectuates the statute’s
legislative intent to impose this legal duty as a matter of policy. To construe the
cause of action as a tort arising out of a contractual relationship defeats the purpose
of section 2-2201 by rendering negligence actions against insurance producers for
failure to procure requested insurance an illusory form of recovery for resulting
damage that ensues. Accordingly, I respectfully dissent.

¶ 69 JUSTICE KILBRIDE joins in this dissent.

- 21 -