An Illinois appeals court says an insurer that sued to dispute coverage paused the very clock it later tried to run out.
The First District Appellate Court, on September 11, 2026, affirmed summary judgment against Direct Auto Insurance Company, holding it could not use the two-year limit on uninsured motorist arbitration to defeat a claim its own coverage litigation had tied up for years.
The dispute traced to a hit-and-run crash on October 21, 2014. Two claimants, one of them the named policyholder, sought uninsured motorist coverage - the coverage that pays when the at-fault driver is uninsured or, as here, never identified. The policy required them to start arbitration within two years of the accident.
They did. The claimants filed their arbitration demand on August 10, 2015, inside the window. Direct Auto had already denied the claim on May 8, 2015, and in July 2016 it filed a declaratory judgment action - a suit asking a judge to declare it owed no coverage - on the ground of late notice.
Under Illinois law, once an insurer sues to dispute coverage of a hit-and-run claim, the court must freeze the related arbitration until the coverage fight ends. The claimants were shut out of arbitration - and any other route to recovery - the whole time.
That time ran to seven years, or 2,572 days. The trial court did not rule until July 17, 2023, finding the policyholders had met the notice terms and not destroyed evidence, and ordered arbitration to proceed.
By then the arbitration file had been closed for an unpaid fee. When the claimants refiled on October 30, 2023, Direct Auto brought a second coverage suit, arguing the new demand fell outside the two-year limit and the original had been extinguished.
The panel disagreed. The claimants had already commenced arbitration on time in 2015. It also held that section 143.1 of the Illinois Insurance Code - a consumer-protection rule pausing a policy's suit deadline between proof of loss and denial - tolled the clock, and the years-long stay from Direct Auto's own suit tolled it further.
An insurer that legally blocks a policyholder from arbitrating, the court reasoned, cannot then argue the policyholder waited too long.
The decision matters for coverage teams: a declaratory action disputing coverage can suspend the same limitations period the insurer later seeks to enforce. The court also treated the arbitration file's closure for an unpaid fee as a temporary pause, not a permanent dismissal, and construed the policy's silence against Direct Auto, which wrote it.
