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Insurance Coverage: Here Today, Gone Tomorrow — Maybe Not
by Anthony C. Valiulis (Much Shelist newsbriefs, May 2001)
A sage once said, insurance is great, except for thecoverage. (If no one ever made this statement, some oneshould have.) As we all know, the fine print of manyinsurance policies frequently takes away much of theprotection a policyholder believes it has. Often thisreduction in coverage is accomplished through thatwonderful invention known as the "endorsement." Wehave all seen such endorsements. They are amendmentsto a policy, most often attached way in the back. Mostendorsements are not a part of the original policy.Instead, they show up when a policy is renewed.
Under Illinois law, an insurance company is supposed tonotify the policyholder in advance of endorsements addedto a renewal policy, at least when they materially altercoverage. Unfortunately, however, in practice this noticeis often hidden within the copious materials routinely sentto a policyholder at the time of renewal. As a result, astime goes on, without the slightest knowledge on the partof the policyholder, risks originally insured are eliminatedfrom coverage, leaving the policyholder at risk. The worstpart is that, because the insurer did not clearly alert thepolicyholder to the reduction in coverage, the risk isunknown. Indeed, the policyholder will often not learn ofthe lack of coverage until a loss. By that time, of course,it is too late.
Fortunately, Illinois law in this area has recently beenstrengthened, to the policyholder's benefit. In one of ourcases, we recently obtained a clarification of the exacttype of notice required to make a material alteration incoverage effective. In Perry v. Morris, the IllinoisAppellate Court held that, for such an endorsement to bevalid, the insurance company must give the policyholderactual, conspicuous, written notice of the change inrenewal coverage at least sixty days before it is to takeeffect. If such notice is not given, the endorsement isinvalid and may never become part of the policy.
All well and good, but what does this mean to you? If aninsurance company denies your claim based on anendorsement that was not part of the original policy, itmay mean that the insurance company acted improperly. If so, you might still have a valid claim. Whether you door not, of course, depends on the particular facts of yourcase. Those facts should be investigated by qualifiedcounsel. In any event, we do know one thing. What was, was taken away, but may now have been given back — by the Illinois Appellate Court.
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