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Appellate Court Rules that Adding an Arbitration Clause to an Insurance Agreement Does Not Constitute a Change in Coverage under Illinois Law

Workers’ compensation insurance is a necessary part of doing business for many companies, so the attorneys at DiTommaso-Lubin are always on the lookout for emerging legal issues in that area. Our Naperville business attorneys recently discovered a decision rendered by the Appellate Court of Illinois that is significant for current and potential clients who have workers’ compensation insurance agreements that contain an arbitration clause.

All-American Roofing, Inc. v. Zurich American Insurance Company pits Plaintiff All-American Roofing against its Defendant insurer, Zurich American in a lawsuit that arose from alleged unpaid deductibles and retrospective insurance premiums. The five-year insurance agreement was based upon retrospectively rated premiums that required Plaintiff to reimburse Defendant after the end of a policy year for claims that arose during that year. After the fourth year, the policy exchanged the retrospectively rated premiums for a larger deductible. The dispute began when Defendant summoned Plaintiff to arbitration regarding the aforementioned unpaid sums pursuant to a mandatory arbitration clause contained within the parties’ agreement. In response to the arbitration summons, All-American Roofing filed for declaratory judgment along with claims for breach of contract, fraud, and related causes of action. Plaintiff requested that the trial court declare that the mandatory arbitration clause was unenforceable and sought damages for their other claims. The trial court stayed the arbitration, dismissed most of Plaintiffs claims through summary judgment and ordered the parties to arbitrate the remaining issues. Plaintiff then appealed the trial court’s rulings regarding the arbitration clause, contract, and fraud claims.

On appeal, Plaintiff argued that the arbitration clause was added to their policy after the first year of coverage and that the clause constituted a material alteration to the policy’s coverage. Furthermore, Plaintiff argued that the Illinois Insurance Code required Defendant to give notice that it was not renewing the original coverage. Because Defendant failed to give such notice, the arbitration clause did not legally take effect. The Appellate Court disagreed, stating that the addition of an arbitration clause did not constitute a change in coverage, and cited the plain language of the statute for their reasoning. The Court went on to hold that the agreements and subsequent addenda to it for the first two years were valid because the parties lawfully entered into the agreements and there was sufficient consideration on both sides. The Court also upheld the trial courts granting of Defendant’s motion for summary judgment on Plaintiff’s fraud claim because there was not sufficient evidence in the record of fraud nor had Plaintiffs identified any material issue regarding Defendant’s alleged violation of the Illinois Consumer Fraud and Deceptive Business Practices Act. The Court held that the arbitration clause was not operative for the final two year of the agreement because Plaintiffs never signed the amended policy documents for those years. The Appellate Court reversed the trial court on this issue because they disagreed with the trial court’s ruling that Plaintiff’s payment and acceptance of coverage signified acceptance of the new terms.

All-American Roofing, Inc. v. Zurich American Insurance Company provides a valuable lesson to business owners who utilize arbitration clauses in their contracts. Namely, this case tells us to read the fine print in any contract before signing it, as you may be getting more (or less, depending on your point of view) than you originally bargained for.


DiTommaso-Lubin is a full-service litigation firm based in Chicago and Oakbrook Terrace, Illinois that focuses on handling all of the legal issues confronting businesses in today’s world. We represent both plaintiffs and defendants, and we have experience representing clients in matters ranging from shareholder disputes to breach of contract cases. Our attorneys have over two decades of experience in business litigation and have won favorable verdicts in “bet the business” lawsuits. DiTommaso-Lubin has a team of Chicago business litigation lawyers who can identify and understand the legal issues in a dispute, no matter how complex they may be. We will use our resources and knowledge to formulate a plan of action that will help further your interests, resolve your problems, and get you back to growing your business. Our focus with each client is to resolve the legal issues efficiently and with minimal costs, while still providing outstanding representation. If your business is being sued or you are seeking advice to stay out of court, call our Chicago business lawyers to discuss what DiTommaso-Lubin can do for you. For a consultation, call 1-877-990-4990 or send us an email through our website.