Background
Lawrence Mosby, an insured under an American Freedom automobile policy, was rear-ended by an uninsured motorist in April 2021. American Freedom denied his uninsured-motorist claim, asserting that Mosby had used the insured vehicle for work without reporting a change in use as required by the policy.
Mosby sued American Freedom for breach of contract on April 24, 2023, the Monday after the second anniversary of the accident. He did not demand arbitration. American Freedom counterclaimed for declaratory relief, contending that Mosby’s failure to seek uninsured-motorist arbitration barred coverage. The Cook County circuit court granted summary judgment to the insurer and held that the policy provided no uninsured-motorist coverage for the accident.
The Court’s Holding
The Illinois Appellate Court reversed and remanded. The dispute was a threshold question whether American Freedom properly denied coverage based on Mosby’s alleged work-related use of the vehicle—not a dispute over the uninsured driver’s liability or the amount of Mosby’s damages.
Under the policy and section 143a of the Illinois Insurance Code, arbitration does not encompass a dispute over the existence of coverage. That issue must first be decided by a court. The court also held that Mosby timely filed suit: because the two-year deadline fell on a Sunday, Illinois law extended the filing period through the following business day.
Key Takeaways
- An insurer’s denial based on an alleged policy condition presents a judicial coverage question, not an arbitrable uninsured-motorist damages dispute.
- An insured need not demand arbitration before suing where coverage itself remains unresolved.
- A contractual limitations deadline that falls on a Sunday extends to the next business day under Illinois law.
Why It Matters
The decision reinforces that uninsured-motorist arbitration clauses do not displace a court’s role in deciding whether coverage exists in the first place. Insurers cannot treat an insured’s failure to arbitrate as dispositive when the insurer has denied coverage on a threshold policy-ground.