CHICAGO — A state appeals panel will allow a couple to pursue their claim their insurance agent misled them to believe he had obtained for them the coverage they had requested - and later needed - to fund their defense against a defamation claim brought against their son, who was accused of bullying another child.

A three-justice panel of the Illinois First District Appellate Court found Cook County Circuit Judge Neil Cohen had erred in dismissing litigation brought by Walter and Lisa Kropt against American Family Insurance and agent Andy Vargas, saying the judge had incorrectly found the couple had failed to file their litigation in time under the statute of limitations.

The initial suit dates back to 2014, when American Family denied the Krops' claim for insurance coverage. believing they allegedly had insurance coverage that was better or equal to their homeowner’s policy they held by Travelers Insurance Company. Under their original policy, the Krops had coverage for libel, slander, defamation of character and invasion of privacy, according to court documents.

In May 2014, the Krops' son T.K. was sued by Mary Andreloas on behalf of another minor for damages sought for defamation, invasion of privacy, and intentional infliction of emotional distress. The claims came when T.K. allegedly harassed and bullied A.A. 

Believing they had coverage for such litigation, the Krops then filed claims with their insurer for coverage, which were denied in August 2014.

American Family cited that their policy didn’t cover a litany of injuries, and the event in question predated the Krops’ policy with the company in 2012, when the Krops switched to American Family from Travelers.

The Krops have claimed Vargas told them they would have the same coverage at a lower rate, leading them to sign on with American Family. According to court records, the American Family insurance policy that the Krops purchased did not have coverage for personal injury resulting from intentional acts or abuse.

In response to the Krops' assertions, in October 2014, American Family filed for declaratory judgment to clarify that the allegations made against the Krops’ son were not covered by the exclusions of the policy and required no coverage for the family. 

The Krops responded almost a year later with a counterclaim against American Family and a third party claim against Vargas, claiming that Vargas and American Family failed to provide the coverage they were looking for. American Family and Vargas filed for dismissal, citing a two-year limitation for the alleged events that occurred, and arguing the family had a responsibility to understand the coverage they were provided at the time they purchased the policy.

Judge Cohen granted American Family's dismissal request in February 2016.

The Krops then appealed, maintaining that their suit was timely as the discovery rule took precedence and their insurance coverage wasn’t denied until August 2014 - which was the point in time at which they became aware their agent had allegedly not obtained for them the coverage they had sought. The appeals panel reversed Cohen's decision, finding that the suit was not barred by time.

"...The Krops knew or reasonably should have known of their injury on Aug. 20, 2014," the appeals justices wrote.  "The Krops filed their third-party complaint against the agent, Vargas, and American Family on Sept. 22, 2015. Thus, their claims are not time barred."

The appeals court remanded the case to Cook County for further proceedings.

The decision was authored by Justice Cynthia Y. Cobb, with justices James G. Fitzgerald Smith and Terrence J. Lavin concurring.

According to Cook County court records, the Krops were represented in the action by the firm of Taylor Miller LLC, of Chicago, while American Family was represented by the firm of Leahy Eisenberg & Fraenkel Ltd., of Chicago.

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American Family Insurance Cook County Circuit Court Illinois First District Appellate Court

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