American Heartland Insurance Co.’s 120-day time limit to file a uninsured motorist claim violated public policy when it was applied to a woman injured in a hit-and-run collision, a state appeals panel ruled Monday.
The ruling from the 1st District Appellate Court paves the way for arbitration between Heartland and Nancy Smith, who was injured in a hit-and-run car crash in March 2010 over the latter’s claim for uninsured motorist benefits.
The appellate court found that, in this instance, Heartland’s strict adherence to its 120-day time limit for these claims violated public policy on uninsured motorist claims.
“Based on the facts and circumstances surrounding this case ... a strict enforcement of the 120-day notice provision contained in Heartland’s policy circumvents the uninsured motorist statutes, violates public policy and is therefore void and unenforceable as applied to Smith, an innocent third party,” Justice Sheldon A. Harris wrote.
On March 1, 2010, Smith was riding in Octavia Pearson’s car when they were struck by a hit-and-run driver in Chicago.
Pearson was insured through a broker called Insured On The Spot. She had a split policy — American Freedom Insurance Co. provided collision coverage while Heartland provided liability coverage.
However, the insurance card Pearson held listed only the two companies — and not what kind of insurance they provided.
Smith was taken to the emergency room with her injures. She obtained an attorney, and a week after the accident, her attorney sent an attorney’s lien and notice to American Freedom.
It wasn’t until July 2010 that American Freedom referred Smith to Heartland for liability coverage. Smith then contacted Heartland by telephone. In September, Smith sent Heartland her uninsured motorist claim and a report on what her medical expenses were.
Heartland denied Smith’s claim in February for not filing it within the 120-day window. In response, Smith sued Heartland in Cook County Circuit Court, arguing Heartland is obligated to cover her claims.
Both sides sought summary judgment, but Circuit Judge Kathleen M. Pantle ruled there were issues of material fact and denied both motions.
A bench trial was held on March 25, 2016, although 1st District Appellate Justice Sheldon A. Harris noted that the record contains nothing about the actual proceedings of the trial, just Pantle’s ruling.
Pantle ruled on April 1, 2016, that Heartland’s time limit was unenforceable and instead used a reasonableness test the state Supreme Court devised in 2006.
Heartland’s appeal — and the panel’s opinion — centered around whether its 120-day time limit violated Illinois public policy on uninsured motorist claims.
Unlike Pantle, the 1st District panel did not think Heartland’s time limit was ambiguous — it’s clear from the language of the policies that claimants have 120 days to file these kinds of claims, the panel noted.
But the panel held that, under Section 143a of the Illinois Insurance Code, there is no time limit for insurance companies to accept these claims.
Additionally, the state Supreme Court in 1982 held that the statute’s purpose cannot be undercut by a time limit imposed by an insurance company.
Policyholders have an advantage when arguing in court against an insurance company over coverage, under previous court rulings.
Further, the appellate panel gave more deference to Smith, whom the panel described as an innocent third party.
“The insured had only an insurance card, which set out the names of two insurance companies without indicating which company was the liability/uninsured carrier,” Harris wrote. “We will not hold Smith accountable to have greater knowledge than did the insured [Pearson] as to who was the liability carrier.”
However, Harris noted in his opinion that Heartland undermined its arguments in its reply brief.
For instance, Heartland repeatedly argued that the 120-day time limit is necessary to weed out fraud. But Heartland has not accused Smith of trying to defraud them.
“Smith’s claim has never been alleged to be fraudulent, denying her claim will in no way prevent fraudulent claims from being filed,” Harris wrote. “In answering Smith’s complaint, Heartland admitted that it knew the accident on March 1, 2010 was a hit-and-run with an unidentified driver.”
Heartland also tried to take issue with the fact that Smith’s name was not included in the police report. As a result, the cause of her injuries are suspicious, the insurer said.
But Harris pointed out that Heartland had previously admitted that Smith was in Pearson’s car. And “the nature and extent of Smith’s injuries is not an issue in this proceeding,” Harris wrote.
The 1st District panel also rejected Heartland’s argument that the 120-day time limit is needed to do a timely inspection of the car Smith was riding in. But this might have been an impossible request because it was Pearson’s car, not Smith’s, the panel found.
Additionally, Heartland was only offering a split policy — meaning certain claimants do not have to contact all of the insurance companies listed. For instance, Pearson only contacted American Freedom to fix her car, and that’s all she needed to call.
“Octavia Pearson did not need nor was she required to contact Heartland,” Harris wrote. “Accordingly, we find Heartland’s contention that timely notice prevented the inspection of the automobile at issue to be without merit.”
Heartland also attempted to argue that Pantle was wrong to reject its motion for summary judgment. But the panel found that Heartland did not properly notify Smith it was appealing Pantle’s decision, so it was not properly preserved for the panel to rule on.
But the panel also noted that, because Pantle had issued an actual ruling in the case, any issues regarding summary judgment essentially merge with the trial ruling.
Smith was represented by Barry Weiss of Topper & Weiss Ltd. He did not return a request for comment.
Heartland was represented by Samuel A. Shelist of Shelist Law Firm LLC. He did not return a request for comment.
Justices Maureen E. Connors and Mary Lane Mikva concurred with the opinion.
The case is Nancy Smith v. American Heartland Insurance Co., 2017 IL App (1st) 161144.