Upon notice that an insurer will no longer insure a specific risk, insureds often call their broker or agent and request they obtain the insurance from another carrier with the same or similar coverages relative to the cancelled policy. Assuming the agent or broker did so, many insureds may not review or read their new policy. Unfortunately, many insureds find out for the first time after a loss that the policy they requested isn’t the same or similar to the coverage they previously had. As one appellate court in Illinois recently held, receipt of the policy or policy’s declarations pages showing the limits is enough to put the insured on notice of their limits.1
In RVP v. Advantage Insurance Services, the insured had in place coverage on two buildings which together provided a blanket limit of coverage which exceeded $3,000,000. Following the cancelation of the policy, the insured requested that his insurance broker find the same or similar coverage to what was in place. The broker ultimately obtained insurance with coverage limits of $1,545,000 and $545,000 for the two buildings. The policy did not include a blanket limit for both buildings. The policy was sent to the insured and included a declaration page which showed the coverage limits. The insured admitted to not looking at the building policy upon receipt to ensure that the same or similar coverage was in place. The policy was renewed the following year. During the renewal period, the insured sustained a total fire loss to the buildings. The insured claimed that he did not learn that he was underinsured until after the loss, and similarly did not learn that the policies he had requested did not provide the same or similar coverage as his previous insurance until after the loss. The insured then brought suit against his broker for negligence and breach of contract for failing to obtain the proper insurance.
The appellate court upheld the trial court’s finding that the insured knew or should have known of the policy limits and whether those limits contained sufficient coverage when the policies were received. The appellate court rejected the insured’s argument it did not discover the lower coverage limits until after the fire loss. Specifically, the court held that the insured received the policies outlining the limits of the coverage and they should have been aware that there was no extension of higher coverage limit than those applied for. The court further rejected the insured’s argument there was no “actual knowledge” of the policy limits, stating that they should have reasonably known of the policy limits upon receipt of the policies or the renewal policies, both of which indicated the coverage limits. The court concluded that the insured’s action was time barred, as the limitations period began running from the time when they received the policies, i.e., the time they could have or should have known of the deficient coverage limits.
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1 RVP v. Advantage Insurance Services, Inc., 2017 IL App (3d) 160276 (Ill. App. June 14, 2017).
