For whom the bell tolls: Was UM arbitration demand timely?
On July 9, 2011, Maricela Leon was involved in an automobile accident in which she sustained injuries. At the time of the accident Leon was working as a driving instructor for Chavez Trucking. She was riding as a passenger in a 2008 Nissan Altima and instructing Stephani Bernardo, who was driving the vehicle. The vehicle was owned by Cirinio Aguirre. During the driving instruction, Bernardo lost control of the vehicle and struck a brick wall. Through her counsel, Leon submitted an uninsured motorist claim for her injuries to her insurer, State Farm Mutual Automobile Insurance Company.
State Farm investigated Leon’s claim and sent a letter to Leon’s counsel requesting specific details and documents relevant to the accident. Leon’s counsel submitted the police report from the accident as well as a letter from Chavez Trucking’s insurer, Progressive Insurance Company. The Progressive letter, which was addressed to Chavez Trucking, explained that Chavez’s policy did not cover injuries sustained by its employees. The letter stated: “As [Leon] is an employee of Chavez Trucking and was injured during course and scope of employment, we cannot find coverage for this loss and must respectfully deny any payment.”
On October 2, 2011, State Farm sent a letter to Leon’s counsel that stated:
“It is questionable whether [Leon] is entitled to benefits either payable or required to be paid under any Worker’s Compensation Law, so as to exclude coverage under the policy with respect to a claim for such injuries. For this reason, and for any other reasons which may become known, [State Farm] reserves all its rights under the policy, including the right to deny coverage in its entirety.”
Two days later, State Farm sent another letter to Leon’s counsel. The letter requested a recorded statement from Leon and asked her counsel to contact the claim representative to “coordinate a date and time for this to happen.” The letter also stated that State Farm was “looking for written verification that there is no workers[’] compensation insurance covering [Leon] for this loss.” The letter concluded: “Please provide us with this information when you can.”
Leon’s counsel responded to State Farm by again submitting a copy of the Progressive letter. State Farm subsequently sent another letter to Leon’s counsel; this letter requested “written documentation establishing there is no insurance coverage for the driver of the vehicle, Stephani Bernardo, and also the owner of the vehicle, Cirinio Aguirre.”
A few days later, State Farm sent another letter to Leon’s counsel stating that “there will be a delay in concluding [Leon’s claim] pending written verification that there would be no workers’ compensation insurance covering the loss, written verification as to whether Bernardo and Aguirre had insurance covering the loss, and a recorded statement from Leon.” State Farm never received any of the requested information from Leon.
On April 5, 2012, State Farm sent another letter to Leon’s counsel. The letter asked for “the status of our requests” for the “information as itemized” in the previous letters. The letter again listed the requested information. The letter concluded: “If we do not hear from you within 30 days, we will assume you are no longer interested in pursuing a claim for your client and we will close our file.”
State Farm did not receive a response from Leon or her counsel. On May 7, 2012, State Farm sent a letter to Leon’s counsel stating that it was closing the file because it had not received a response to its previous letter.
State Farm did not hear from Leon or her counsel again until over a year later. Meanwhile, the two-year limitation period in which to demand arbitration expired on July 9, 2013.
On August 2, 2013, Leon’s counsel sent a letter to State Farm asking for clarification in regard to the “‘written verification’ requested in relation to no other applicable insurance.” The letter also stated that Leon’s counsel would be “delighted to produce” Leon for a recorded statement.
That same day State Farm faxed a letter to Leon’s counsel stating that, pursuant to the policy, the two-year limitation period to demand arbitration had expired. The letter stated that State Farm would “no longer be able to consider a claim under the uninsured [motorist] coverage.” Minutes later, Leon’s counsel faxed a letter back to State Farm making a demand for arbitration.
State Farm then filed a complaint for declaratory judgment against Leon. The complaint sought a declaration that no uninsured motorist coverage was available to Leon because she did not demand arbitration within two years after the date of the accident. The complaint sought, in the alternative, a declaration that no uninsured motorist coverage was available to Leon because she had not submitted sufficient evidence that the vehicle and/or driver involved in the accident were uninsured and that she was not entitled to workers compensation benefits.
Leon answered the complaint by arguing that she had provided State Farm a sufficient proof of loss, which tolled (paused or delayed) the time she could file a demand for arbitration, rendering her demand timely.
At trial a State Farm automobile field claim specialist testified that although State Farm did receive copies of the police report and the Progressive letter, neither document provided all of the information needed to investigate Leon’s claim. Specifically, the Progressive letter failed to state whether Progressive provided any liability coverage to the driver of the vehicle, Bernardo. The specialist further noted that neither document stated whether the owner of the vehicle, Aguirre, had any liability coverage or whether Leon was entitled to any workers compensation benefits. The specialist testified that State Farm sent several letters to Leon’s counsel requesting that information, as well as a recorded statement from Leon, but never received any response.
The specialist clarified that the existence of workers compensation coverage would not completely exclude coverage under the State Farm policy but rather would reduce the amount so as to cover only what the workers compensation coverage did not. He agreed that the phrase “please provide this information when you can” in one of State Farm’s letters was vague and “theoretically” could include a date more than two years after the accident, but he assumed it would mean to submit the requested information “sooner rather than later.”
Leon cited not only the tolling clause in the policy but also a section of the Illinois Insurance Code that similarly tolls the time an insured may bring legal action once proof of loss has been filed. Leon argued that she had filed a sufficient proof of loss, which triggered the tolling provisions and rendered her demand for arbitration timely.
The court concluded that Leon did not file a sufficient proof of loss to trigger the tolling provision of either the policy or the relevant section of the insurance code. Holding that Leon’s August 2, 2013, demand for arbitration was untimely, the court entered judgment in favor of State Farm. Leon appealed.
On appeal, Leon claimed that the police report and the Progressive letter provided State Farm all of the necessary information to investigate her claim. She noted that the police report included contact information for the driver and owner of the vehicle and argued that State Farm could have requested their insurance information directly from them. Leon also claimed that State Farm “did absolutely nothing to investigate” the claim and instead “sat on it,” lulling Leon into complacency and allowing the limitation period to expire. Leon additionally argued that the phrase “please provide this information when you can” in one of State Farm’s letters was “extremely vague.” Leon claimed that “when you can” “theoretically could include a date more than two years after the accident,” meaning that Leon could submit the information, including a demand for arbitration, more than two years after the date of the accident. Leon alternatively argued that State Farm waived the proof of loss requirement because it never furnished a proof of loss form to Leon and the policy did not otherwise define “proof of loss.”
The court stated that Leon had not provided State Farm the information it needed to investigate her claim and therefore had not filed a sufficient proof of loss to toll the limitation period. The court was not persuaded by Leon’s argument that State Farm “sat on” her claim, lulling her into a sense of complacency and allowing the limitation period to expire. Finally the court noted that Leon’s policy clearly stated that Leon must bring any legal action against State Farm within two years after the date of the accident.
The judgment of the trial court was affirmed.
State Farm Mutual Automobile Insurance Company v. Leon—Appellate Court of Illinois, First District, Sixth Division—August 2, 2019—No. 1-18-0655.