Disclosure Of Umbrella Policy Not Required By State Statute

August 25, 2021 / Writing and Speaking

By Don R. Sampen, published, Chicago Daily Law Bulletin, August 24, 2021

The 1st District Appellate Court recently held that an Insurance Code requirement that an automobile insurer must disclose the insured’s “liability insurance policy,” did not require disclosure of the insured’s umbrella coverage when requested by a claimant seeking recovery against the insured.

The case is Kim v. State Farm Mutual Automobile Insurance Co., 2021 IL App (1st) 200135 (June 30). The claimant, Penny Kim, was represented by the Sinson Law Group of Chicago. Riley Safer Holmes & Cancila LLP of Chicago represented the insurer, State Farm.

Kim brought suit against the insured, Elizabeth Swann, in 2012 as the result of an automobile accident. Prior to filing suit, Kim’s attorney, Kent Sinson, made inquiry of State Farm regarding Swann’s policy limits. State Farm responded that the insured had bodily injury coverage of $100,000 per person and $300,000 per accident.

Shortly after suit was filed, attorney Sinson wrote again to clarify whether the information provided included disclosure of any policy applicable to the accident. State Farm then disclosed that Kim was also covered under an umbrella policy with a $1 million liability limit.

Thereafter Swann was served with discovery in the litigation and disclosed only the primary layer of her coverage in response to an interrogatory. Following a motion for sanctions, however, Swann corrected her answer to include the umbrella policy.

In 2013, Kim amended her complaint against Swann to add State Farm as a defendant and proposed class claims against it regarding the initial failure to disclose the umbrella policy. Later, Kim settled with Swann for her combined primary and umbrella limits, and voluntarily dismissed her from the litigation.

A fourth amended complaint asserted against State Farm raised claims for common law fraud, for violation of section 143.24b of the Illinois Insurance Code, 215 ILCS 5/143.24b, and for violation of the Consumer Fraud Act, 815 ILCS 505/1, et seq., all based on the initial failure to disclose the umbrella policy.

In 2017 State Farm moved for summary judgment, which was granted, and Kim took this appeal.

Analysis

In an opinion by Justice Bertina E. Lampkin, the 1st District affirmed. She initially addressed whether section 143.24b of the Insurance Code requires disclosure of an insured’s umbrella coverage.

That section requires an automobile insurer, upon receipt of a certified letter from a claimant and description of injuries, to “disclose the dollar amount of liability coverage under the insured’s personal private automobile liability insurance policy.”

The issue thus was whether “personal automobile insurance policy” included an umbrella policy, and Lampkin said it did not. In support she cited Hartbarger v. Country Mutual Insurance Co., 107 Ill.App.3d 391 (1982), and other more recent cases drawing a distinction between an automobile liability policy and an umbrella policy.

Consequently, wrote Lampkin, the trial court properly granted summary judgment for State Farm on Kim’s section 143.24b claim.

With respect to the common law and statutory fraud claims, Lampkin found them tethered to her section 143.24b claim, and would fail for the same reason.

In addition, Kim and her attorney were aware of the umbrella policy at the time of Swann’s incorrect interrogatory response made during the litigation. And, in any event, the incorrect interrogatory response was not made by State Farm and could not be imputed to State Farm.

State Farm was also protected by the litigation privilege, which holds that misconduct or misrepresentations made during the course of litigation are to be addressed by sanctions procedures in the litigation, not by pursuing new claims against a new party. Kim’s remedy thus was to seek sanctions against Swann, which Kim abandoned by settling with Swann.

Lampkin further found that the fraud claims failed because Kim was not deceived by a material misrepresentation. That no deception occurred was evidenced by Kim’s reaching a settlement that included the limits of both Swann’s primary and umbrella policies.

Kim also lacked standing to pursue relief under the Consumer Fraud Act, according to Lampkin. Kim was only a third-party beneficiary of the State Farm policy, and the claim of deception did not occur in the course of trade or commerce and did not impact consumers, as required by the statute.

Lampkin further rejected Kim’s additional claim for negligent misrepresentation. She rejected that cause of action because, among other reasons, it requires a showing that the defendant, here State Farm, was in the business of providing information to the claimant to guide her business dealings. As a non-policyholder, Kim did not qualify.

Finally, Lampkin rejected Kim’s claim for sanctions under section 155 of the Insurance Code, 215 ILCS 5/155. Lampkin observed that penalties under that section are only available to the policyholder, which Kim was not.

The court therefore affirmed summary judgment in favor of State Farm.

Key Points

  • The requirement that an insurer disclose an insured’s “private automobile liability insurance policy” under section 143.24b of the Illinois Insurance Code requires disclosure only of the insured’s primary layer policy.
  • The litigation privilege in Illinois requires that misconduct or misrepresentations made during the course of litigation be addressed by sanctions procedures in the litigation, not by pursuing new claims against a new party.
  • Penalties under section 155 of the Insurance Code are available only to policyholders.
  • Chicago

    Illinois 60603

    10 South LaSalle Street

    Chicago, Illinois 60603

    T: 312.855.1010 TF: 800.826.3505 F: 312.606.7777 Office Managing Partner: Dennis D. Fitzpatrick

  • New York

    New York 10005

    28 Liberty Street 39th Floor

    New York, New York 10005

    T: 212.805.3900 TF: 800.826.3505 F: 212.805.3939 Office Managing Partner: Tyler Jay Lory

  • Mission Viejo

    California 92691

    27285 Las Ramblas

    Suite 200

    Mission Viejo, California 92691

    T: 949.260.3100 TF: 800.826.3505 F: 949.260.3190 Office Managing Partner: Ian R. Feldman

  • Florham Park

    New Jersey 07932

    100 Campus Drive

    Florham Park, New Jersey 07932

    T: 973.410.4130 TF: 800.826.3505 F: 973.410.4169 Office Managing Partner: Carl M. Perri

  • Michigan City

    Indiana 46360

    200 Commerce Square

    Michigan City, Indiana 46360

    T: 219.262.6106 TF: 800.826.3505 F: 312.606.7777 Office Managing Partners: Paige M. Neel, Kimbley A. Kearney

  • Appleton

    Wisconsin 54914

    4650 W. Spencer Street

    Appleton, Wisconsin 54914

    T: 920.560.4658 TF: 800.826.3505 F: 920.968.4650 Office Managing Partner: Patrick L. Breen

  • Stamford

    Connecticut 06902

    68 Southfield Avenue

    2 Stamford Landing Suite 100

    Stamford, Connecticut 06902

    T: 203.921.0303 TF: 800.826.3505 F: 212.805.3939 Office Managing Partner: Matthew J. Van Dusen

  • Tampa

    Florida 33609

    4830 West Kennedy Boulevard, One Urban Center

    Suite 600

    Tampa, Florida 33609

    T: 813.509.2578 TF: 800.826.3505 F: 312.606.7777 Office Managing Partner: Anne E. Kevlin

  • San Francisco

    California 94111

    100 Pine Street

    Suite 1250

    San Francisco, California 94111

    T: 415.745.3598 TF: 800.826.3505 F: 949.260.3190 Office Managing Partner: Ian R. Feldman