No Coverage For Telephone Act Or Related State Claims

February 9, 2016 / Writing and Speaking

The 2nd District Appellate Court recently held that a policy exclusion applicable to claims under the federal Telephone Consumer Protection Act and “similar” laws excluded coverage not only for the TCPA claims but also claims based on the same facts for an alleged common law and state statutory violation.

ICC, the insurer in Illinois Casualty Co. v. West Dundee China Palace Restaurant Inc., 2015 IL App (2d) 150016 (Dec. 23, 2015), was represented by Best, Vanderlaan & Harrington of Naperville. Anderson & Wanca of Rolling Meadows represented the claimant, Wellington Homes Inc.

Wellington filed a class-action lawsuit against West Dundee in 2009, alleging the restaurant had a practice of faxing advertisements to Wellington and other recipients without first obtaining permission from the recipients.

The complaint alleged three counts: one based on the TCPA, 47 U.S.C. §227, et seq.; a second based on common law conversion; and a third based on violation of the Illinois Consumer Fraud Act, 815 ILCS 505/1, et seq. The complaint sought a minimum of $500 per violation, as provided for in the TCPA.

ICC’s policy covered West Dundee. Following tender to it of the Wellington complaint, ICC filed a declaratory action seeking a determination that it owed no coverage. It relied primarily on an exclusion in its policy applicable to “[a]ny liability or legal obligation of any insured … arising out of” the TCPA or “by any other similar statutes, ordinances, orders directives or regulations.”

Although West Dundee itself defaulted, Wellington responded, and it and ICC eventually filed cross-motions for summary judgment. The trial court initially found that ICC had a duty to defend, but upon reconsideration in light of the 2nd District’s recent decision in G.M. Sign Inc. v. State Farm Fire & Casualty Co., 2014 IL App (2d) 130593, the court reversed itself and found that ICC had no duty to defend.

Wellington filed this appeal.

Analysis

In an opinion by Justice Robert D. McLaren, the 2nd District affirmed. He initially discussed the G.M. Sign case. There, as in the instant case, the plaintiff alleged violation of the TCPA, plus additional counts for common law conversion and a Consumer Fraud Act violation.

The insurer’s policy, however, contained an exclusion for claims “arising directly or indirectly” under the TCPA or statutes or other laws prohibiting the transmitting of information. The G.M. Sign court ended up finding that all three counts of the complaint were excluded from coverage.

While conceding here that its TCPA count was excluded, Wellington attempted to distinguish G.M. Sign with respect to the other counts on the ground that the ICC exclusion lacked the “directly or indirectly” language. McLaren disagreed, finding the allegations that West Dundee sent the faxes without permission, and that it was attempting to market goods or services, were common to all three counts.

He further observed that the complaint had to be read as a whole, that little weight is given to the label under which a count is brought, and rather that the determination of the duty to defend focuses on the conduct alleged. Here, he said, the conduct alleged in the second and third counts constituted nothing more than a rephrasing of the conduct alleged in the TCPA count, and that all three alleged property damage arising out of the TCPA and similar statutes.

McLaren also rejected Wellington’s argument that the complaint’s allegations were too vague to fit within the exclusion because they left open the possibility of coverage. Pointing out that the complaint alleged that on a specific date West Dundee faxed a specific advertisement to the underlying plaintiffs, he found the property damage was explicitly excluded by the ICC policy.

Wellington also contended that the “arising out of” language in the ICC exclusion had been construed broadly by the trial court, whereas it should have been construed narrowly as a restriction on coverage.

McLaren countered that Wellington’s proposed rule of construction applies only where a policy is ambiguous, that Wellington was trying to create an ambiguity where none existed and that under commonly applied dictionary definitions, the policy excluded coverage for the relief being sought.

The court therefore affirmed summary judgment in favor of ICC.

Key Points

  • The determination of whether there is a duty to defend focuses on the conduct alleged, not the legal label under which a count is brought.
  • The rule that restrictions on coverage should be narrowly construed applies only when the policy is ambiguous.
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