Hepler Broom, LLC

Read Your Insurance Policy Carefully: Insured Bound to Terms of Policy Despite Alleged Representations by Insurer’s Agent

February 6, 2018

As we have learned in recent days, we all need to be careful with the things we say, for sometimes those things we say can be used against us. But the life lessons do not end there. We also need to read things carefully, for the things we fail to read can be used against us as well, especially holders of insurance policies.

A recent opinion from the Illinois Appellate Court, Third District, in Laurent v. Johnson, 2017 IL App (3d) 160627, shows just how far an insured’s duty to read his or her insurance policy can reach. The Laurent plaintiff sued the lawyer of her deceased husband’s estate for legal malpractice. She claimed that the lawyer mishandled a claim against her husband’s health insurer for reimbursement of his medical expenses. The policy had a $100,000 maximum calendar year policy limit that the insurer paid. The plaintiff, however, claimed that the insurer’s agent previously had told plaintiff and her husband that “the most [her husband] would have to pay out-of-pocket during any given year for a claim was $4000” and thus “that the policy was essentially unlimited.” In light of this alleged representation, the plaintiff accused the estate’s lawyer of malpractice in failing to obtain reimbursement of her deceased husband’s medical expenses that exceeded this policy limit.

The Third District rejected the plaintiff’s argument by applying what it described as the “discrepancy rule.” Specifically, the appellate court held that “where an insured sues his insurer and/or his insurer’s agent claiming that a policy provision should not be given effect because the provision was incorrect or not in keeping with what the insured was told by the insurer or the agent, the insured may not recover against the insurer or the agent for that error or discrepancy if the insured failed in his duty to read the policy and to inform the insurer or the agent of that error or the discrepancy in the policy” (emphasis added). Because the health insurance policy in Laurent clearly had a $100,000 limit that plaintiff and her deceased husband could have discovered by reading the policy, the appellate court held that her deceased husband would not have had a valid claim against his insurer (and thus that plaintiff did not have a valid legal malpractice claim against the lawyer of his estate). The appellate court also rejected the plaintiff’s argument that the insurer’s agent somehow served as an agent for the plaintiff and her husband.

It is important to note that the Third District held that the insured’s duty to read applies in situations not only where the insurance policy is “incorrect,” but also where the policy is “not in keeping with what the insured was told by the insurer or the agent.” The appellate court’s broad application of the discrepancy rule in Laurent to essentially negate alleged representations by the insurance company or its agents underscores just how important it is for a policyholder to read his or her entire policy.