Hepler Broom, LLC

Be Careful What You Say: Insurer Estopped from Asserting Coverage Defenses Based on Agent’s Representations

January 16, 2018

We all say things we regret. But sometimes, those things we say can be used against us. The same goes for insurance companies. So held the Illinois Appellate Court, Second District, in its recent unpublished decision in Country Preferred Ins. Co. v. Badri-Monaghan, 2017 IL App (2d) 170134-U. The court started the year with a decision finding an insurance company was estopped from asserting a coverage defense based on statements made to the insured by the agent. The policy required the insured to submit a written demand for arbitration, which she failed to do. The evidence showed, however, that she failed to do so based on statements made by the carrier’s captive agent. That agent apparently informed the insured that he had submitted her underinsured motorist coverage claim and “was going to make sure that everything was set up.” No one mentioned an arbitration demand requirement as a prerequisite to coverage.

Later, the insured hired an attorney to assist her with her insurance and other claims. She relayed to her attorney what the agent had told her: that he already had set up her underinsured motorist claim.

The trial court held, and the appellate court agreed, that the agent’s statements that the insured was not required to do anything else to submit her claim estopped the insurer from declining coverage based on the insured’s failure to submit a written demand for arbitration. This was true even though the insured failed to submit medical bills or return calls regarding her claim. This also was true even though the insured was represented by counsel.

Though the Second District made its decision in Badri-Monaghan an unpublished order, there is a lesson to be learned: be careful what you say. Making representations to an insured regarding what is needed for a claim can be held against the carrier seeking to enforce conditions to coverage down the line.