Appellate Court of Illinois decision reminds insurers to communicate with insureds or face potential consequences: Estoppel of coverage defenses

The Appellate Court of Illinois recently reminded insurers that they may be estopped from raising coverage defenses through their misleading acts or statements, including silence. In Monroy-Perez v. Sentry Select Ins. Co., 2025 IL App (1st) 241711, the Court held that the insurer was estopped from asserting that the insured failed to bring suit within the policy’s two-year limitation period when the insurer withheld the policy from the insured until after the limitations period expired, despite receiving a timely request from the insured for a copy of the policy.

On September 5, 2019, Monroy-Perez was injured in a two-vehicle accident when he was riding in a truck owned by his employer. It was undisputed that Monroy-Perez was an insured under the auto policy issued to his employer. On January 8, 2020, Monroy-Perez’s attorney provided notice of his uninsured/underinsured claim to the insurer. The notice requested that: (1) the insurer immediately advise if the notice did not comply with the policy’s notice requirements; (2) provide a certified copy of the policy; and (3) that the matter be arbitrated. The insurer did not respond, but sought updates on Monroy-Perez’s medical treatment and expenses. On July 20, 2021, Monroy-Perez demanded the payment of damages he claimed. The insurer responded with requests for additional information, and Monroy-Perez complied with those requests. About a year later, in late 2022, Monroy-Perez requested that the insurer proceed with the arbitration and requested a copy of the policy multiple times. On January 25, 2023, the insurer provided a copy of the policy to Monroy-Perez for the first time. On February 6, 2023, Monroy-Perez again demanded arbitration and designated an arbitrator. After receiving no response, the insured filed suit on March 9, 2023.

The policy provided that any legal action against the insurer must be brought within two years after the date of the accident. However, that provision was inapplicable if arbitration proceedings had commenced within two years of the date of the accident. The policy further provided that if the insured and insurer did not agree as to the amount of recoverable damages, the matter may be arbitrated.

The Court held that the arbitration demand and complaint were untimely and barred by the limitations period. Despite this, the Court held that the insurer was estopped from asserting the limitations period defense because the insurer withheld the policy from Monroy-Perez until after its expiration, ignoring the timely request for a copy. The Court reasoned that if the insurer had complied with the insured’s timely request, he would have been aware of the suit limitations period and arbitration provisions. The Court further noted that the insurer failed to respond to the January 8, 2020 letter that specifically asked to notify Monroy-Perez if the notice was noncompliant, even where the insurer being aware that the arbitration demand was ineffective. The Court found that the insurer “concealed the limitations period and the prerequisites for requesting arbitration” but continued to have communications with the insured, which could have led him to believe the limitations period had not expired. The Court also held that Monroy-Perez reasonably relied on the insurer’s conduct and was prejudiced by the insurer withholding the policy since the insured was unaware of the terms of the policy, which ultimately led to the untimely filing of the complaint and requests for arbitration that were either ineffective or untimely.

The Court emphasized that the bases for its estoppel holding rested primarily on the insurer’s failure to provide a copy of the policy or disclose the relevant provisions until after the expiration of the limitations period, despite the insured’s request. It further held that the insurer’s regular communications or negotiations added further support. The Court noted that the Illinois Supreme Court has recognized that while estoppel may be established by words, it may also rest upon silence. Here, the insurer chose to withhold the policy, which contained the terms the insured needed in order to comply.

This recent decision emphasizes the significance of insurers’ inactions and silence, which just as misleading affirmative acts or statements, can ultimately bar insurers from asserting coverage defenses under Illinois law. Insurers should be diligent in responding to insureds’ communications throughout the entirety of the claim handling process.