Fayezi v. Illinois Casualty Company
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Opinion
2016 IL App (1st) 150873
FIRST DIVISION JUNE 30, 2016
No. 1-15-0873
MORTESA “MARTY” FAYEZI and AMERICAN ) Appeal from the AWNING AND WINDOW COMPANY, INC., ) Circuit Court of ) Cook County. Plaintiffs-Appellants, ) ) No. 13 CH 28448 v. ) ) ILLINOIS CASUALTY COMPANY, ) Honorable ) Rodolfo Garcia, Defendant-Appellee. ) Judge Presiding.
PRESIDING JUSTICE CUNNINGHAM delivered the judgment of the court, with opinion. Justices Connors and Harris concurred in the judgment and opinion.
OPINION
¶1 Plaintiffs-appellants Mortesa “Marty” Fayezi and American Awning & Window Co., Inc.
(collectively, plaintiffs), appeal from the circuit court’s order dismissing their amended
complaint with prejudice in this insurance coverage declaratory judgment action. For the reasons
set forth below, we affirm the judgment of the circuit court.
¶2 BACKGROUND
¶3 The plaintiffs initiated this declaratory judgment action to determine whether the
defendant-appellee, Illinois Casualty Company (ICC), was obligated to defend a class action
against ICC’s insured, and to indemnify the eventual settlement of that underlying action.
¶4 ICC was the insurer for Pat’s Pizzeria, Inc. (Pat’s), the defendant in the underlying class
action. ICC issued a “Businessowners Policy” to Pat’s effective September 2, 2005, through 1-15-0873
September 2, 2006 (the 2005-06 policy). Among other categories of coverage, the 2005-06
policy provides coverage for “Bodily Injury and Property Damage.” That coverage was subject
to certain exclusions, including an exclusion for:
“Any liability or legal obligation of any insured with
respect to ‘bodily injury’ or ‘property damage’ arising out of any
of the following:
***
(g) The Telephone Consumer Protection Act
(TCPA); 1 or
(h) Any amendments to these other laws or by any
other similar statutes, ordinances, orders, directives or
regulations.”
The 2005-06 policy separately sets forth coverage for “Personal and Advertising Injury.” That
category of coverage also contained an exclusion for “[a]ny liability or legal obligation of any
insured with respect to ‘personal and advertising injury’ arising out of” the TCPA or “any
amendments to these laws or any similar statutes, ordinances, orders, directives or regulations.”
¶5 On or about March 31, 2006, Pat’s transmitted unsolicited advertisements by facsimile
(fax) to 3636 recipients. In April 2009, one of the recipients, Fayezi, filed a class action
complaint (the underlying complaint) in the circuit court of Cook County on behalf of himself
“and all other persons similarly situated” who had received such faxes.
1 In relevant part, the TCPA prohibits the use of “any telephone facsimile machine *** to send, to a telephone facsimile machine, an unsolicited advertisement” if the sender does not have an “established business relationship with the recipient” and if the advertisement does not notify recipients that they may request to opt out of receiving any future unsolicited facsimile advertisements. 47 U.S.C. § 227(b)(1)(C) (2012).
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¶6 The underlying complaint began with a “preliminary statement” that “[t]his case
challenges [Pat’s] practice of faxing unsolicited advertisements.” The preliminary statement
recites that the TCPA “provides a private right of action and provides statutory damages of $500
per violation” and states that the case was initiated “as a class action asserting claims against
[Pat’s] under the TCPA, the common law of conversion, and the consumer protection statutes
forbidding and compensating unfair business practices.” The preliminary statement specified that
“[p]laintiff seeks an award of statutory damages for each violation of the TCPA.”
¶7 The complaint alleged facts common to all counts that “[o]n or about March 31, 2006,
Defendant faxed an advertisement to Plaintiff” and “faxed the same and similar advertisements
to *** other recipients without first receiving the recipients’ express permission or invitation.”
¶8 The underlying complaint proceeded to plead three causes of action: count I asserted
violation of the TCPA; count II pled a common-law count of conversion, alleging that Pat’s had
wrongfully “misappropriated the class members’ fax machines, toner, paper and employee time”;
and count III pled a violation of the Consumer Fraud and Deceptive Business Practices Act
(Act). See 815 ILCS 505/2 (West 2012).
¶9 Count I pleaded that it was brought on behalf of a class including “[a]ll persons who (1)
on or after four years prior to the filing of this action, (2) were sent telephone facsimile messages
of material advertising *** by or on behalf of Defendant (3) with respect to whom Defendant did
not have prior express permission or invitation for the sending of such faxes and (4) with whom
Defendant did not have an established business relationship.” Count II and III contained identical
statements, referring to persons who had received such faxes within five years (count II) or three
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years prior to the filing of the action (count III). 2 Each of the three counts explicitly
“incorporate[d] the preceding paragraphs as though fully set forth herein.”
¶ 10 Pat’s tendered defense of the underlying action to its insurer, ICC. However, ICC refused
to defend the action, apparently on the basis of the 2005-06 policy’s exclusions for “[a]ny
liability or legal obligation” for bodily injury, property damage, or personal and advertising
injury “arising out of” the TCPA (the TCPA exclusions).
¶ 11 Pat’s and Fayezi subsequently entered into a settlement agreement of the underlying
action, by which the parties agreed to an amount of liability that the class would seek to recover
only from Pat’s insurers, including ICC.
¶ 12 The recitals to that settlement agreement specify that “the Class includes 3,636 persons to
whom Defendant faxed advertisements without prior express permission nor invitation” on or
about March 31, 2006. The agreement recites that “a finding of liability under the TCPA with
statutory damages of $500 per unsolicited fax would result in a damage award of $1,818,000.00
before trebling” and that “such a judgment would bankrupt [Pat’s] and cause the dissolution of
its business.”
¶ 13 The parties agreed to seek court approval of a judgment against Pat’s in the amount of
$1,818,000. However, the settlement agreement specified that the plaintiffs would not seek
recovery from Pat’s but instead would proceed against Pat’s insurers. Thus, Pat’s agreed to
assign to the class its rights under the 2005-06 policy, and the class “agree[d] to seek recovery to
satisfy the Judgment only against [Pat’s] insurers,” including ICC.
2 Apparently, the references to persons receiving faxes within three, four, or five years prior to the filing of the action were based on the applicable statutes of limitations for each of the three counts. However, the complaint did not specifically allege that Pat’s had sent any fax advertisements other than those sent on or about March 31, 2006.
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¶ 14 On July 14, 2010, the court in the underlying action approved the settlement agreement.
In that order, the court certified a class consisting of “All persons to whom [Pat’s] sent
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2016 IL App (1st) 150873
FIRST DIVISION JUNE 30, 2016
No. 1-15-0873
MORTESA “MARTY” FAYEZI and AMERICAN ) Appeal from the AWNING AND WINDOW COMPANY, INC., ) Circuit Court of ) Cook County. Plaintiffs-Appellants, ) ) No. 13 CH 28448 v. ) ) ILLINOIS CASUALTY COMPANY, ) Honorable ) Rodolfo Garcia, Defendant-Appellee. ) Judge Presiding.
PRESIDING JUSTICE CUNNINGHAM delivered the judgment of the court, with opinion. Justices Connors and Harris concurred in the judgment and opinion.
OPINION
¶1 Plaintiffs-appellants Mortesa “Marty” Fayezi and American Awning & Window Co., Inc.
(collectively, plaintiffs), appeal from the circuit court’s order dismissing their amended
complaint with prejudice in this insurance coverage declaratory judgment action. For the reasons
set forth below, we affirm the judgment of the circuit court.
¶2 BACKGROUND
¶3 The plaintiffs initiated this declaratory judgment action to determine whether the
defendant-appellee, Illinois Casualty Company (ICC), was obligated to defend a class action
against ICC’s insured, and to indemnify the eventual settlement of that underlying action.
¶4 ICC was the insurer for Pat’s Pizzeria, Inc. (Pat’s), the defendant in the underlying class
action. ICC issued a “Businessowners Policy” to Pat’s effective September 2, 2005, through 1-15-0873
September 2, 2006 (the 2005-06 policy). Among other categories of coverage, the 2005-06
policy provides coverage for “Bodily Injury and Property Damage.” That coverage was subject
to certain exclusions, including an exclusion for:
“Any liability or legal obligation of any insured with
respect to ‘bodily injury’ or ‘property damage’ arising out of any
of the following:
***
(g) The Telephone Consumer Protection Act
(TCPA); 1 or
(h) Any amendments to these other laws or by any
other similar statutes, ordinances, orders, directives or
regulations.”
The 2005-06 policy separately sets forth coverage for “Personal and Advertising Injury.” That
category of coverage also contained an exclusion for “[a]ny liability or legal obligation of any
insured with respect to ‘personal and advertising injury’ arising out of” the TCPA or “any
amendments to these laws or any similar statutes, ordinances, orders, directives or regulations.”
¶5 On or about March 31, 2006, Pat’s transmitted unsolicited advertisements by facsimile
(fax) to 3636 recipients. In April 2009, one of the recipients, Fayezi, filed a class action
complaint (the underlying complaint) in the circuit court of Cook County on behalf of himself
“and all other persons similarly situated” who had received such faxes.
1 In relevant part, the TCPA prohibits the use of “any telephone facsimile machine *** to send, to a telephone facsimile machine, an unsolicited advertisement” if the sender does not have an “established business relationship with the recipient” and if the advertisement does not notify recipients that they may request to opt out of receiving any future unsolicited facsimile advertisements. 47 U.S.C. § 227(b)(1)(C) (2012).
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¶6 The underlying complaint began with a “preliminary statement” that “[t]his case
challenges [Pat’s] practice of faxing unsolicited advertisements.” The preliminary statement
recites that the TCPA “provides a private right of action and provides statutory damages of $500
per violation” and states that the case was initiated “as a class action asserting claims against
[Pat’s] under the TCPA, the common law of conversion, and the consumer protection statutes
forbidding and compensating unfair business practices.” The preliminary statement specified that
“[p]laintiff seeks an award of statutory damages for each violation of the TCPA.”
¶7 The complaint alleged facts common to all counts that “[o]n or about March 31, 2006,
Defendant faxed an advertisement to Plaintiff” and “faxed the same and similar advertisements
to *** other recipients without first receiving the recipients’ express permission or invitation.”
¶8 The underlying complaint proceeded to plead three causes of action: count I asserted
violation of the TCPA; count II pled a common-law count of conversion, alleging that Pat’s had
wrongfully “misappropriated the class members’ fax machines, toner, paper and employee time”;
and count III pled a violation of the Consumer Fraud and Deceptive Business Practices Act
(Act). See 815 ILCS 505/2 (West 2012).
¶9 Count I pleaded that it was brought on behalf of a class including “[a]ll persons who (1)
on or after four years prior to the filing of this action, (2) were sent telephone facsimile messages
of material advertising *** by or on behalf of Defendant (3) with respect to whom Defendant did
not have prior express permission or invitation for the sending of such faxes and (4) with whom
Defendant did not have an established business relationship.” Count II and III contained identical
statements, referring to persons who had received such faxes within five years (count II) or three
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years prior to the filing of the action (count III). 2 Each of the three counts explicitly
“incorporate[d] the preceding paragraphs as though fully set forth herein.”
¶ 10 Pat’s tendered defense of the underlying action to its insurer, ICC. However, ICC refused
to defend the action, apparently on the basis of the 2005-06 policy’s exclusions for “[a]ny
liability or legal obligation” for bodily injury, property damage, or personal and advertising
injury “arising out of” the TCPA (the TCPA exclusions).
¶ 11 Pat’s and Fayezi subsequently entered into a settlement agreement of the underlying
action, by which the parties agreed to an amount of liability that the class would seek to recover
only from Pat’s insurers, including ICC.
¶ 12 The recitals to that settlement agreement specify that “the Class includes 3,636 persons to
whom Defendant faxed advertisements without prior express permission nor invitation” on or
about March 31, 2006. The agreement recites that “a finding of liability under the TCPA with
statutory damages of $500 per unsolicited fax would result in a damage award of $1,818,000.00
before trebling” and that “such a judgment would bankrupt [Pat’s] and cause the dissolution of
its business.”
¶ 13 The parties agreed to seek court approval of a judgment against Pat’s in the amount of
$1,818,000. However, the settlement agreement specified that the plaintiffs would not seek
recovery from Pat’s but instead would proceed against Pat’s insurers. Thus, Pat’s agreed to
assign to the class its rights under the 2005-06 policy, and the class “agree[d] to seek recovery to
satisfy the Judgment only against [Pat’s] insurers,” including ICC.
2 Apparently, the references to persons receiving faxes within three, four, or five years prior to the filing of the action were based on the applicable statutes of limitations for each of the three counts. However, the complaint did not specifically allege that Pat’s had sent any fax advertisements other than those sent on or about March 31, 2006.
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¶ 14 On July 14, 2010, the court in the underlying action approved the settlement agreement.
In that order, the court certified a class consisting of “All persons to whom [Pat’s] sent
advertising facsimiles on or about March 31, 2006 *** without the recipients’ prior express
permission or invitation” and determined that Pat’s had faxed 3636 such advertisements. The
order approved the terms of the settlement agreement and entered judgment “in favor of the
Class in the total amount of $1,818,000 *** said judgment to be satisfied only from [Pat]’s
insurers.”
¶ 15 On December 28, 2012, the plaintiffs initiated this action by filing a declaratory judgment
complaint in the circuit court of Lake County, alleging that ICC was required to defend Pat’s in
the underlying action and to indemnify the resulting judgment in favor of the class. The
complaint attached the 2005-06 policy, but reserved the right to amend the complaint if
discovery revealed the existence of additional policies.
¶ 16 On April 23, 2013, ICC filed a forum non conveniens motion, arguing that Lake County
was an improper forum, particularly since the underlying action was litigated in the circuit court
of Cook County. Following extensive briefing, the circuit court granted ICC’s motion and
transferred the action to the circuit court of Cook County on September 6, 2013.
¶ 17 On May 29, 2014, ICC filed a motion to dismiss. Relying on the TCPA exclusions in the
2005-06 policy, ICC argued that it had no duty to defend the underlying class action or to
indemnify the resulting judgment. In that motion, ICC relied heavily on the 2014 decision of the
Second District of the Illinois Appellate Court in G.M. Sign, Inc. v. State Farm Fire & Casualty
Co., 2014 IL App (2d) 130593. ICC argued that G.M. Sign had analyzed a “nearly identical”
policy exclusion in a separate class action (filed by the plaintiffs’ counsel in this case), also
based on unsolicited faxes, which had pled the same three causes of action. ICC argued that G.M.
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Sign presented an “identical scenario” and thus compelled a conclusion that ICC had no duty to
defend or indemnify in this case.
¶ 18 On July 14, 2014, the plaintiffs filed a motion to strike ICC’s motion to dismiss as
improper, claiming that it was not a valid motion to dismiss but “an extraordinarily premature
motion for summary judgment.” In the alternative, the plaintiffs requested that any ruling on the
motion “should be stayed until an evidentiary record can be developed through discovery.”
¶ 19 On July 21, 2014, the court entered an order staying ICC’s motion to dismiss and setting
a briefing scheduling on the plaintiffs’ motion to strike. However, before those motions were
decided, the plaintiffs filed an amended declaratory judgment complaint on August 22, 2014.
¶ 20 Unlike the original complaint, the amended complaint included allegations questioning
the validity of the TCPA exclusions in the 2005-06 policy. In particular, the amended complaint
alleged, “upon information and belief,” that the 2005-06 policy “was an attempted renewal of a
2004-05 Policy” and that earlier policies did not contain the TCPA exclusions.
¶ 21 The amended complaint further alleged that, since the underlying complaint sought
certification of classes that included recipients of Pat’s faxes up to five years prior to the filing of
the action in 2009, the underlying complaint “raised the potential of claims within the 2003-04
and 2004-05 Policy periods.” In turn, the plaintiffs pled, ICC would be obligated to defend those
potential claims pursuant to such prior policies that did not contain the TCPA exclusions.
¶ 22 The amended complaint further alleged that, “upon information and belief,” ICC violated
Illinois law requiring an insurer “to provide notice of a material reduction in coverage 60 days
before a policy renewal,” claiming that ICC failed to provide notice of the TCPA Exclusions to
be included in the 2005-06 policy. Due to ICC’s alleged failure to give required notice, the
plaintiffs alleged, the TCPA exclusions were “not validly part of the 2005-06 Policy.”
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¶ 23 On September 19, 2014, ICC filed a motion to dismiss the amended complaint pursuant
to sections 2-615 and 2-619 of the Code of Civil Procedure (Code). 735 ILCS 5/2-615, 2-619
(West 2014). That motion again urged that the Second District’s decision in G.M. Sign, 2014 IL
App (2d) 130593, was “factually and legally identical” to this case and supported a finding that
ICC did not owe a duty to defend or indemnify the underlying action. In addition, ICC’s motion
to dismiss attached a notarized affidavit, dated September 17, 2014, addressing the amended
complaints’ allegations that the 2005-06 policy was a renewal of earlier policies.
¶ 24 In that sworn affidavit, Brian Doran states that he was the underwriting manager for ICC
and was “personally familiar with the underwriting policies and procedures of [ICC] as well as
the [underwriting] file management software and system.” Doran averred that ICC’s file system
“reflects the policy history for any particular policy,” including “whether there are any policy
renewals *** for a particular insured.” Doran stated that he was personally familiar with that
system and was “able to look at a Policy issued during a particular Policy Period, and to
determine whether that was the original Policy or if it was a renewal Policy.” Doran averred that
the 2005-06 policy “was the first Policy issued to [Pat’s], and was not a renewal of any earlier
policy issued to this insured.” Thus, Doran averred that the amended complaint’s allegations
“that polices were in effect for any earlier period *** are not correct.”
¶ 25 The plaintiffs filed a response to ICC’s motion to dismiss the amended complaint on
October 27, 2014. In that response, the plaintiffs urged that the motion to dismiss supported by
Doran’s affidavit was procedurally improper under section 2-619(a)(9) of the Code (735 ILCS
5/2-619(a)(9) (West 2014)) and was “actually a premature motion for summary judgment.” The
plaintiffs urged that they were entitled to conduct discovery to test the assertions in Doran’s
affidavit.
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¶ 26 The plaintiffs’ response also disputed ICC’s contention that this case was controlled by
G.M. Sign, contending that “materially different policy language” was at issue in G.M. Sign
compared to the 2005-06 policy, and that the scope of the exclusion in ICC’s 2005-06 policy was
narrower. Specifically, the plaintiffs argued that the exclusion at issue in G.M. Sign, for injuries
arising “directly or indirectly out of any action or omission that violates” the TCPA (2014 IL
App (2d) 130593, ¶ 8), excluded any liability based on conduct that violated the TCPA, whereas
the TCPA exclusions in ICC’s 2005-06 policy excluded “liability arising out of the TCPA” but
not “claims of all stripes premised on conduct underlying violations of the TCPA.” The plaintiffs
further argued that G.M. Sign conflicted with case law establishing that an insurer may not
justifiably refuse to defend a lawsuit against its insured unless it is clear that the complaint’s
allegations fail to state facts that potentially bring the case within coverage.
¶ 27 On November 7, 2014, ICC filed a reply memorandum, in which it argued that since the
plaintiffs failed to provide any counteraffidavit, the facts in Doran’s affidavit “must be deemed
admitted.” ICC also argued that the plaintiffs were not entitled to discovery because they failed
to file an affidavit pursuant to Illinois Supreme Court Rule 191 (eff. Jan. 4, 2013) “explaining
what discovery or witnesses they would need to depose.”
¶ 28 With respect to application of the TCPA exclusions, ICC’s reply memorandum argued
that the Second District’s decision in G.M. Sign was directly on point and that the arguments
raised by the plaintiffs in this case had been rejected by the Second District. Specifically, ICC
argued that the TCPA exclusions relieved ICC of its duty to defend, as all three counts of the
underlying class action complaint were based on the same conduct, which violated the TCPA.
¶ 29 On February 19, 2015, the trial court granted ICC’s motion to dismiss the plaintiffs’
amended complaint. The court’s order found that “ICC’s motion [and] affidavit are procedurally
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proper” and that the Second District’s decision in G.M. Sign was “controlling.” The court
dismissed the plaintiff’s amended complaint in its entirety and with prejudice. The plaintiffs filed
a notice of appeal on March 4, 2015.
¶ 30 ANALYSIS
¶ 31 We note that we have jurisdiction because the plaintiffs filed a notice of appeal within 30
days of the final judgment dismissing their complaint with prejudice. See Ill. S. Ct. R. 303(a)
(eff. May 30, 2008).
¶ 32 ICC’s motion to dismiss was premised upon sections 2-615 and 2-619 of the Code,
which may be asserted in a single combined motion. See 735 ILCS 5/2-619.1 (West 2014). “A
section 2-615 motion to dismiss tests the legal sufficiency of a complaint,” whereas a “section 2-
619 motion to dismiss admits the sufficiency of the complaint, but asserts a defense outside the
complaint that defeats it.” Patrick Engineering, Inc. v. City of Naperville, 2012 IL 113148, ¶ 31.
“Specifically, section 2-619(a)(9) permits involuntary dismissal where the claim is barred by
‘other affirmative matter.’ ” Id. (quoting 735 ILCS 5/2-619(a)(9) (West 2010). “When ruling on
such motions, a court must accept as true all well-pleaded facts” but “cannot accept as true mere
conclusions unsupported by specific facts.” Id. “Our review of a dismissal under either section 2-
615 or 2-619 is de novo.” Id.
¶ 33 The plaintiffs’ appeal argues: (1) that the trial court improperly granted dismissal based
upon extrinsic evidence (the Doran affidavit) and without allowing discovery as to whether ICC
had issued prior policies; (2) even if there were no such prior policies, the TCPA exclusions in
the 2005-06 policy did not exempt ICC from a duty to defend the underlying lawsuit; and (3)
because ICC breached its duty to defend, ICC is estopped from contesting its obligation to
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indemnify the settlement of the underlying action. Applying de novo review, for the reasons
below we conclude that the plaintiffs’ contentions lack merit.
¶ 34 First, as a procedural matter, the plaintiffs assert that the circuit court “improperly
disregarded allegations and considered outside evidence”–the Doran affidavit–in deciding the
motion to dismiss. They recognize that under section 2-619(a)(9) of the Code, a defendant can
move to dismiss based on “affirmative matter.” 735 ILCS 5/2-619(a)(9) (West 2014). However,
they contend that ICC’s motion did not raise an “affirmative matter” but rather, improperly
sought to address the essential issue of liability. Further, they assert that they should have been
able to pursue discovery to test Doran’s assertion that ICC did not issue earlier policies to Pat’s.
¶ 35 In response, ICC argues that the Doran affidavit “did not address the ultimate issue of
liability, which was whether ICC owed a duty to defend or duty to indemnify” but only
addressed the plaintiffs’ allegations as to whether ICC had issued earlier policies. ICC further
argues that the plaintiffs cannot assert a need for discovery, because they failed to file any
affidavit pursuant to Illinois Supreme Court Rule 191(b) (eff. Jan. 4, 2013).
¶ 36 We agree with ICC. First, we conclude that the section 2-619 motion, supported by
Doran’s affidavit, properly argued that the plaintiffs’ action was “barred by other affirmative
matter avoiding the legal effect of or defeating the claim” (735 ILCS 5/2-619(a)(9) (West 2014)),
and did not improperly dispute an essential issue regarding liability. The lone case cited by the
plaintiffs for their argument on this point is Howle v. Aqua Illinois, Inc., 2012 IL App (4th)
120207, which concerned a lawsuit alleging that the plaintiff had been bitten by a dog on
property owned by the defendant landlord. The landlord moved to dismiss pursuant to section 2-
619.1 of the Code (735 ILCS 5/2-619.1 (West 2010)), attaching an affidavit in which the
landlord’s officer averred that the landlord never owned or controlled the dog and had no
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knowledge of prior biting incidents. Id. ¶ 21. On that basis, the trial court dismissed one count of
the plaintiff’s complaint alleging violation of the Animal Control Act (510 ILCS 5/1 et seq.
(West 2010)). Id.
¶ 37 On appeal, the Fourth District concluded that “section 2-619(a)(9) of the Code was the
wrong vehicle for [the landlord] to raise the issue of ownership *** because that issue did not
constitute ‘affirmative matter.’ ” Id. ¶ 27. The court explained that “ ‘affirmative matter’ means
some kind of defense other than a negation of the essential allegations of the plaintiff’s cause of
action.” (Internal quotation marks omitted.) Id. ¶ 30 (quoting Smith v. Waukegan Park District,
231 Ill. 2d 111, 120-21, (2008)). The Howle court found that the landlord’s motion to dismiss
“did not argue that an affirmative matter independent of the complaint, such as immunity, res
judicata, or a violation of the applicable statute of limitations, barred Howle’s suit,” but had
“addressed an essential issue regarding liability–namely, ownership of the offending dog–and
amounted to nothing more than [the defendant’s] negation of an essential element of Howle’s
complaint.” Id. ¶ 32. Thus, the claimed “affirmative matter” was “essentially an answer denying
an allegation set forth in the complaint.” Id. ¶ 36.
¶ 38 We do not find that Howle establishes that the motion to dismiss here was improper.
Instead, we find that the motion to dismiss in this case is much more akin to that in Piser v. State
Farm Mutual Automobile Insurance Co., 405 Ill. App. 3d 341 (2010), an insurance coverage
action where we affirmed a section 2-619 dismissal premised upon an “affirmative matter”
demonstrating that the plaintiff was not entitled to coverage. In that case, the defendant insurer
denied the plaintiff’s claim for coverage relating to a motorcycle accident, after several
unsuccessful attempts by the insurer to obtain information from the plaintiff. Id. at 343-44. The
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plaintiff sued the insurer for breach of contract and for “vexatious and unreasonable delay in
refusing to pay the claim.” Id. at 344.
¶ 39 The insurer moved to dismiss pursuant to section 2-619 of the Code, alleging that
plaintiff’s failure to cooperate barred his claim. Id. The motion was supported by an affidavit of
the insurer’s claim representative, which attested that the plaintiff had breached the cooperation
clause of the subject policy by, among other things, failing to submit to an examination under
oath and failing to provide requested financial records; the affidavit also attached copies of the
insurer’s correspondence to the plaintiff. Id. at 347-48. On appeal, the plaintiff argued that the
“section 2-619 motion merely constituted an attempt to negate the allegations in plaintiff’s
complaint” and that the trial court “improperly weighed State Farm’s materials in dismissing his
complaint.” Id. at 344.
¶ 40 In our analysis, our court recognized that a section 2-619 motion “admits the legal
sufficiency of the plaintiff’s complaint but asserts affirmative defenses or other matter that
avoids or defeats the plaintiff’s claim.” Id. We recognized: “The phrase ‘affirmative matter’
encompasses any defense other than a negation of the essential allegations of the plaintiff’s cause
of action” and “is something in the nature of a defense that completely negates the cause of
action or refutes crucial conclusions of law or conclusions of material fact contained in or
inferred from the complaint.” (Internal quotation marks omitted.) Id. at 344-45. We affirmed the
dismissal of the Piser complaint, concluding that “the affidavit and supporting materials
submitted *** in support of the motion to dismiss did not simply constitute a denial of plaintiff’s
allegations; rather, they raised additional affirmative matter barring his claim–breach of the
cooperation clause.” Id. at 346.
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¶ 41 We find that Piser is instructive. In this case, Doran’s affidavit presented an “affirmative
matter” in the form of his sworn testimony, based on his personal familiarity with ICC’s records,
that the 2005-06 policy was not a renewal, as ICC had not issued earlier policies to Pat’s. This
sworn testimony did not merely deny, but refuted the plaintiffs’ allegations that the 2005-06
policy was preceded by prior policies that did not contain the TCPA exclusions.
¶ 42 Furthermore, we also agree with ICC that the plaintiffs’ failure to oppose the motion to
dismiss with an affidavit pursuant to Illinois Supreme Court Rule 191(b) precludes them from
asserting a right to discovery on the issue. Ill. S. Ct. R. 191(b) (eff. Jan. 4, 2013). “Affidavits in
support of motions under section 2-619 are controlled by Supreme Court Rule 191.” Piser, 405
Ill. App. 3d at 349.
¶ 43 Under Rule 191(b), a party opposing a section 2-619 motion to dismiss or a motion for
summary judgment that is supported by the movant’s affidavit may submit a counteraffidavit
explaining why discovery is needed in order to obtain evidence necessary to oppose the motion.
See Parkway Bank & Trust Co. v. Korzen, 2013 IL App (1st) 130380 (discussing Rule 191(b) in
context of opposition to a motion for summary judgment in a foreclosure action). Thus, Rule
191(b) provides that:
“If the affidavit of either party contains a statement that any of the
material facts which ought to appear in the affidavit are known
only to persons whose affidavits affiant is unable to procure ***
naming the person[ ] and showing why their affidavit[ ] cannot be
procured and what affiant believes they would testify to if sworn,
*** the court may make any order that may be just, either granting
or refusing the motion, or granting a continuance to permit
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affidavits to be obtained, or for submitting interrogatories to or
taking the depositions of any of the persons so named, or for
producing documents in the possession of those persons or
furnishing sworn copies thereof.” Ill. S. Ct. R. 191(b) (eff. Jan. 4,
2013).
“Parties who fail to file Rule 191(b) affidavits cannot complain that the discovery process was
insufficient or limited.” (Internal quotation marks omitted.) Korzen, 2013 IL App (1st) 130380,
¶ 48.
¶ 44 Furthermore, we note that “under well-established statutory procedure for section 2-619
motion practices, plaintiff’s failure to properly contest [a movant’s] affidavit by submitting a
counteraffidavit is fatal to his cause of action. The failure to challenge or contradict supporting
affidavits filed with a section 2-619 motion results in an admission of the fact stated therein.
[Citation.]” Piser, 405 Ill. App. 3d at 352.
¶ 45 The plaintiffs do not dispute that they failed to file a Rule 191(b) affidavit explaining
what discovery was needed, and did not file any counteraffidavit disputing the statements in
Doran’s affidavit. Rather, the plaintiffs’ reply brief asserts that Rule 191 is inapplicable to ICC’s
motion, citing cases discussing why certain motions for summary judgment do not necessarily
require strict compliance with Rule 191.
¶ 46 Our court has held: “There are two types of summary judgment motions: (1) a motion
affirmatively showing that some element of the case must be resolved in the defendant’s favor,
requiring the defendant to prove something that it would not be required to prove at a trial, and
(2) a motion of the kind recognized by the United States Supreme Court in Celotex Corp. v.
Catrett, 477 U.S. 317, 322 *** (1986), in which a defendant points out the absence of evidence
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supporting plaintiff’s position.” Willett v. Cessna Aircraft Co., 366 Ill. App. 3d 360, 368-69
(2006). “A Celotex-type motion is appropriate only when the nonmovant has had an adequate
opportunity to conduct discovery.” Id. at 369. “[S]trict compliance with Rule 191(b)’s affidavit
requirement *** is not automatically necessary when a defendant files a Celotex-type motion.”
Jiotis v. Burr Ridge Park District, 2014 IL App (2d) 121293, ¶ 26. “The trial court has discretion
to permit a continuance for discovery without compliance with Rule 191(b),” as “it is critical that
the respondent be given a reasonable opportunity to conduct discovery before summary
judgment.” (Internal quotation marks omitted.) Id. ¶ 27.
¶ 47 The plaintiffs assert that ICC’s motion to dismiss was a Celotex-type motion, such that
they do not have to comply with Rule 191(b). We disagree. ICC’s motion was not a Celotex-type
motion for summary judgment, which merely “points out the absence of evidence supporting
plaintiff’s positions.” Willett, 366 Ill. App. 3d at 368. Rather, ICC moved to dismiss pursuant to
section 2-619(a)(9), asserting an affirmative matter–Doran’s sworn testimony–refuting the
plaintiff’s suggestion that ICC had issued earlier policies.
¶ 48 Thus, we agree with the trial court that the submission of Doran’s affidavit in support of
ICC’s motion to dismiss was procedurally proper. Further, as the plaintiffs failed to file any Rule
191(b) affidavit, they cannot complain that further discovery was needed. Indeed, as the
plaintiffs failed to file any counteraffidavit, the contents of Doran’s affidavit were effectively
admitted. Piser, 405 Ill. App. 3d at 352 (“The failure to challenge or contradict supporting
affidavits filed with a section 2-619 motion results in an admission of the facts stated therein.”).
¶ 49 Aside from their arguments that ICC’s motion to dismiss was procedurally improper, the
plaintiffs independently argue that, notwithstanding the TCPA exclusions, ICC had a duty to
defend the underlying lawsuit. Specifically, they argue that the presence of the conversion claim
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in the underlying complaint was independent of the TCPA count and thus implicated ICC’s duty
to defend.
¶ 50 The plaintiffs acknowledge that the TCPA exclusions stated that ICC’s coverage did not
apply to “[a]ny liability or legal obligation *** arising out of” the TCPA. However, they argue
that the exclusions do not apply to “common law claims premised on identical facts, much less
common law claims that might not be actionable under the TCPA at all.” In essence, the
plaintiffs argue that because their underlying complaint pled a count for conversion–although
premised on the very same allegations as the TCPA count–ICC was obligated to defend the
underlying action, notwithstanding the TCPA exclusions.
¶ 51 The Second District of our court has rejected this argument in a largely identical case
(litigated by the plaintiffs’ counsel in this case) that concerned application of a similar exclusion
to a lawsuit with virtually identical allegations. G.M. Sign, Inc. v. State Farm Fire & Casualty
Co., 2014 IL App (2d) 130593. As in this appeal, G.M. Sign concerned a declaratory judgment
action involving insurance coverage for an underlying class action lawsuit arising out of
unsolicited faxes. The underlying plaintiff, G.M. Sign, filed a class action alleging that the
underlying defendant, Michael Schane, had faxed unsolicited advertisements for his business on
September 6, 2007. Id. ¶¶ 5-6.
¶ 52 As in this appeal, G.M. Sign’s underlying complaint against Schane contained three
counts: (1) violation of the TCPA; (2) conversion; and (3) violation of the Act. Id. ¶ 6. Each
count incorporated the same allegations concerning the September 6, 2007 faxes, and “[a]ll three
counts incorporated allegations that the unsolicited fax advertisements violated the TCPA.” Id.
As in this case, the three counts in the original complaint proposed certification of classes
consisting of persons who received fax advertisements from Schane within four, five, or three
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years before the filing of the action, corresponding to the governing statutes of limitation for
each cause of action. Id. ¶ 7.
¶ 53 Schane’s business insurer, State Farm, denied coverage for G.M. Sign’s lawsuit based on
a policy exclusion that specified that the insurance did not apply to “ ‘Bodily injury, property
damage, personal injury, or advertising injury arising directly or indirectly out of any action or
omission that violates or is alleged to violate’ ” the TCPA. (Emphasis added.) Id. ¶ 8.
¶ 54 As in this case, G.M. Sign entered into a settlement agreement with Schane by which the
class agreed to seek recovery only from Schane’s insurers. Similar to the settlement in this case,
the parties in the G.M. Sign underlying action agreed that Schane had faxed 49,825
advertisements and that “ ‘a finding of liability under the TCPA with statutory damages of $500
per unsolicited fax would result in a damage award of $24,912,500.00 before trebling.’ ” Id. ¶ 9.
As in this case, the G.M. Sign settlement agreement noted that “ ‘such a judgment would
bankrupt [Schane] and cause the dissolution of his business.’ ” Id. Schane agreed to the entry of
a $4.9 million judgment entered against him, but the class agreed to “satisfy the judgment only
from [Schane’s] State Farm insurance policy.” Id.
¶ 55 After the trial court gave preliminary approval of the settlement, G.M. Sign was granted
leave to file an amended complaint whose “admitted purpose *** was to ‘ “plead into possible
insurance coverage available under Schane’s insurance policies.” ’ ” (Internal quotation marks
omitted.) Id. ¶ 12 (quoting G.M. Sign, Inc. v. Schane, 2013 IL App (2d) 120434). Specifically,
the counts alleging conversion and violation of the Act were amended, so that they “incorporated
only those factual allegations that contained no reference to the TCPA.” Id.
¶ 56 The trial court subsequently ordered final approval of the settlement. Id. ¶ 15. “Although
the amended complaint proposed a different class for counts II and III than the class the trial
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court had certified based upon the original complaint, the certified class and the settlement
agreement remained unchanged.” Id.
¶ 57 Mirroring this case, the plaintiffs in G.M. Sign then initiated an action seeking a
declaration that State Farm owed Schane a duty to defend and to indemnify the $4.9 million
judgment. State Farm filed a counterclaim based on its TCPA policy exclusion and moved for
judgment on the pleadings. Id. ¶ 18. G.M. Sign filed a cross-motion for judgment on the
pleadings, arguing that counts I and II “pleaded claims that were potentially within coverage.”
Id.
¶ 58 The trial court ruled that State Farm owed a duty to defend and indemnify because counts
II and III of the amended complaint, alleging conversion and violation of the Act, “were broad
enough to potentially include faxes not covered by” the TCPA exclusion. Id. After State Farm
filed a second amended counterclaim and the parties filed cross-motions for summary judgment,
the trial court held that State Farm was estopped from raising policy-based defenses to coverage.
Id. ¶ 19.
¶ 59 On appeal, State Farm argued, inter alia, that it had no duty to defend because the
exclusion in its policy for injury “arising directly or indirectly out of any action or omission that
violated” the TCPA applied to all three counts of the underlying complaint, including the
“alternative counts” for conversion and consumer fraud. Id. ¶ 22. The Second District agreed
with State Farm.
¶ 60 In its analysis, the Second District first recognized:
“Ordinarily, in a declaratory judgment action where the
issue is an insurer’s duty to defend, a court looks first to the
allegations of the underlying complaint and compares them to the
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insurance policy’s relevant provisions. [Citation.] Refusal to
defend is unjustifiable unless it is clear from the face of the
underlying complaint that the facts alleged do not potentially fall
within the policy’s coverage. [Citation.] In determining whether
there is a duty to defend, the allegations in the underlying
complaint must be construed liberally, and any doubts must be
resolved in favor of coverage. [Citation.]” Id. ¶ 25.
The Second District also recognized that “in construing an insurance policy, the court must
ascertain the intent of the parties to the contract” and that “[i]f the words used in the policy are
unambiguous, courts afford them their plain, ordinary, and popular meaning.” Id. ¶ 26.
¶ 61 The Second District concluded that, in light of the State Farm policy’s exclusion, “G.M.
Sign’s amended complaint did not allege claims that potentially fell within coverage.” Id. ¶ 27.
The court noted that G.M. Sign raised two arguments as to why the counts for conversion and
violation of the Act potentially fell within coverage, notwithstanding the exclusion: “(1) the
alternative counts had different elements and sought different damages than the TCPA count, and
(2) the alternative counts were premised on different facts than the TCPA count and were broad
enough to include faxes that did not violate the TCPA.” Id.
¶ 62 As to the first argument, the Second District “disagree[d] that *** the pertinent analysis
requires comparing the elements of the alternate counts to the elements of the TCPA count.” Id.
¶ 28. Rather, since the language of the exclusion precluded coverage for injury “ ‘arising directly
or indirectly’ out of any action or omission that violates or is alleged to violate the TCPA,” the
Second District reasoned that the “proper analysis of the ‘arising out of’ language in [the
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exclusion] is a ‘but for’ analysis, not an elements analysis.” Id. (citing Maryland Casualty Co. v.
Chicago & North Western Transportation Co., 126 Ill. App. 3d 150, 154 (1984)).
¶ 63 The Second District noted that, in a decision assessing whether a personal injury lawsuit
fell within an insurance policy covering injuries “arising out of” work by a subcontractor, our
court reviewed the underlying complaint and found the insurer owed coverage where, “ ‘but for’
the electrical subcontractor’s [work] *** the underlying plaintiff would not have suffered
injury.” Id. ¶ 29 (citing American Economy Insurance Co. v. DePaul University, 383 Ill. App. 3d
172, 182 (2008)). Thus, the G.M. Sign court reasoned that the proper inquiry in assessing the
applicability of the State Farm exclusion was “whether, but for Schane’s alleged act of sending
faxes that violated the TCPA, G.M. Sign would have suffered injury.” Id.
¶ 64 The Second District reasoned that since all three counts were premised on the exact same
conduct, which violated the TCPA, the exclusion in the State Farm policy barred coverage for all
counts. The court specifically rejected G.M. Sign’s argument that the alternative counts “were
premised on different facts than the TCPA count and were broad enough to include faxes that did
not violate the TCPA.” Id. ¶ 30. The Second District held that although the alternative counts
avoided reference to the TCPA or its statutory elements, “they nevertheless were based on the
same facts as the TCPA count.” Id. Specifically, “[a]ll three counts incorporated by reference the
allegations that, on or about September 6, 2007,” G.M. Sign and the class members had
“received ‘the same or similar unsolicited facsimiles.’ Other than these factual allegations–which
were the very allegations that formed the basis for the TCPA count–the amended complaint
contained no allegations referencing any faxes sent by Schane.” Id. Thus, “because it did not
contain any factual allegations of faxes other than those that violated the TCPA, G.M. Sign’s
amended complaint did not trigger State Farm’s duty to defend.” Id. ¶ 34.
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¶ 65 Moreover, the Second District noted that G.M. Sign’s argument “contradicts the position
that it successfully advanced in the underlying litigation.” Id. ¶ 41. The Second District pointed
out that the settlement agreement was based on the original complaint, in which “all three counts
incorporated identical facts alleging the sending of fax advertisements in violation of the TCPA.”
Id. ¶ 42. Moreover, the “the amount of the settlement was based on *** TCPA damages,” as the
settlement agreement had recited the potential amount of TCPA statutory damages. Id. ¶ 43. The
Second District reasoned that: “Having obtained the benefit of its settlement agreement in the
underlying litigation by taking the position that Schane sent unsolicited fax advertisements in
violation of the TCPA, G.M. Sign should not now be permitted to argue that State Farm owed a
duty to defend Schane because its amended complaint potentially included faxes that fell outside
of the TCPA.” Id. ¶ 44. The Second District thus reversed the circuit court and directed it to enter
judgment in favor of State Farm. Id. ¶ 48.
¶ 66 Notably, in a recent case involving ICC and the same exclusion language at issue in this
appeal, the Second District relied on G.M. Sign to hold that ICC did not have a duty to defend a
nearly identical underlying complaint. Illinois Casualty Co. v. West Dundee China Palace
Restaurant, Inc., 2015 IL App (2d) 150016. In West Dundee, a class action was filed containing
the same counts at issue in this case: violation of the TCPA, conversion, and violation of the Act.
Id. ¶ 5. Each count incorporated allegations that West Dundee had faxed unsolicited
advertisements on or about May 16, 2006. Id.
¶ 67 ICC filed a complaint seeking a declaratory judgment that it had no duty to defend or
indemnify the underlying action due to an exclusion in its policy for West Dundee, which–as in
this case–specified that insurance did not apply to “Any liability or legal obligation of any
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insured with respect to bodily injury or property damage arising out of” the TCPA. (Internal
quotation marks omitted.) Id. ¶ 9.
¶ 68 After cross-motions for summary judgment, the trial court initially ruled that ICC had a
duty to defend. Id. ¶ 10. However, upon a motion to reconsider, the trial court entered summary
judgment in ICC’s favor. Id. ¶ 11. The trial court found that under G.M. Sign, “the ICC policy
exclusion language would apply to all counts” of the underlying complaint and “did not trigger a
duty to defend or indemnify.” Id. On appeal, the Second District agreed, affirming the judgment
in favor of ICC.
¶ 69 In West Dundee, the plaintiff in the underlying class action unsuccessfully argued that
G.M. Sign was not controlling because the exclusion in G.M. Sign differed from the ICC policy,
as the State Farm policy excluded injuries “ ‘arising directly or indirectly out of any action or
omission that violates’ ” the TCPA. (Emphasis in original.) Id. ¶ 18 (quoting G.M. Sign, 2014 IL
App (2d) 130593, ¶ 8). The plaintiff in the underlying action argued that because the ICC
policy’s exclusion “does not contain the words ‘directly or indirectly,’ coverage is excluded only
for liability and legal obligations arising out of the TCPA itself.” Id.
¶ 70 The Second District disagreed, finding that “[t]he allegations in the [conversion and
consumer fraud] counts of the underlying complaint completely fail to state facts that either
actually or potentially bring the case within, or potentially within, the policy’s coverage.” Id.
¶ 19. The West Dundee court reasoned that: “Common to all three counts are allegations that
West Dundee sent the unsolicited faxes without the express permission or invitation of the
underlying plaintiffs.” Id. Thus, “the conduct alleged in [counts II and III] constitutes nothing
more than a rephrasing of the conduct alleged in count I; that West Dundee violated the TCPA
by ‘sending advertising faxes [to the underlying plaintiffs] without first obtaining their prior
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express permission or invitation.’ ” Id. ¶ 20. As “[a]ll three counts allege property damage
arising out of the TCPA,” the underlying complaint in West Dundee “did not trigger ICC’s duty
to defend.” Id.
¶ 71 We find that the Second District’s decisions in G.M. Sign as well as West Dundee are
well-reasoned. Thus, we similarly hold that the allegations of the underlying complaint in this
case did not trigger ICC’s duty to defend in light of the TCPA exclusions.
¶ 72 The plaintiffs urge that G.M. Sign is distinguishable or otherwise erroneous. First, they
urge that the language of the TCPA exclusions in ICC’s policy–which exclude “[a]ny liability or
legal obligation of any insured with respect to” bodily injury, property damage, or personal and
advertising injury “arising out of” the TCPA–is narrower than the State Farm exclusion at issue
in G.M. Sign, which excluded damages or injuries “arising directly or indirectly out of any action
or omission that violates or is alleged to violate” the TCPA. (Emphasis and internal quotation
marks omitted.) G.M. Sign, 2014 IL App (2d) 130593, ¶ 8.
¶ 73 The plaintiffs argue that the exclusion in this case “is particular to ‘liability or legal
obligation *** arising out of’ the [TCPA]” but that it “says nothing about common law claims
premised on different facts, much less common law claims that might not be actionable under the
TCPA at all.” They further argue that the exclusion at issue in G.M. Sign “focused on the
conduct of the insured” whereas ICC’s policy excludes “liability arising out of the TCPA.” They
urge that ICC’s exclusions “do not encompass claims of all stripes premised on conduct
underlying violations of the [TCPA], as in G.M. Sign” but “narrowly exclude[ ] only the liability
and legal obligations arising out of the TCPA itself” and “do[ ] not extend to the separate
liability and legal obligations arising out of conversion and [consumer fraud] claims–whether or
not they are premised on the same underlying conduct.”
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¶ 74 Just as the Second District did in West Dundee, we reject the attempts to distinguish G.M.
Sign on the basis of such differences in the language in the exclusions. Although the particular
wording of the exclusions differs slightly, we do not find that any such differences warrant a
different outcome.
¶ 75 First, to the extent the plaintiffs assert that the TCPA exclusions “say nothing about
common law claims premised on different facts,” that argument fails, because the underlying
complaint simply failed to plead any claims premised on any facts other than the March 31, 2006
fax advertisements that formed the basis for all three counts. Notably, although the complaint
sought to define classes of persons who may have received faxes up to five years prior to its
filing, the complaint did not actually allege that Pat’s sent any other faxes on any date other than
March 31, 2006.
¶ 76 Furthermore, we do not find that the wording of ICC’s TCPA exclusions, compared to
the language at issue in G.M. Sign, is sufficiently different so as to compel a different result.
Rather, both the exclusion at issue in G.M. Sign and the TCPA exclusions in this case used
unambiguously broad language to indicate that liability “arising” from the TCPA would not be
covered. While the phrasing of the State Farm exclusion for damages to injury “arising directly
or indirectly out of any action or omission that violates” the TCPA is undoubtedly broad, we do
not find that the wording of ICC’s policy exclusions for “[a]ny liability or legal obligation of any
insured with respect to” injuries “arising out of” the TCPA is significantly narrower in scope.
Rather, the phrases “any liability or legal obligation,” “with respect to,” and “arising out of” are
plainly of broad meaning. The wording of the State Farm TCPA exclusion in G.M. Sign, as well
as ICC’s TCPA exclusions at issue in West Dundee and in this case, are sufficiently broad and
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explicit to exclude coverage where, as here, a complaint fails to plead any cause of action that
would not simultaneously implicate liability under the TCPA.
¶ 77 In this case (as in G.M. Sign and West Dundee), the underlying complaint failed to plead
any specific facts that would support liability for counts II and III but which would not also
violate the TCPA under count I. The counts for conversion and violation of the Act do not
attempt to allege any other particular offending conduct other than the sending of unsolicited fax
advertisements on or about March 31, 2006, the very same conduct underlying count I for
violation of the TCPA. Indeed, counts II and III specifically incorporated the allegations in count
I, the TCPA count, as well as the allegations in the complaint’s “preliminary statement”
referencing the TCPA. As in West Dundee, the counts in this case for conversion and violation of
the Act were “nothing more than a rephrasing of the conduct alleged in count I” for violation of
the TCPA. West Dundee, 2015 IL App (2d) 150016, ¶ 20.
¶ 78 Thus, just as the Second District found with regard to the identical exclusion in West
Dundee, we find that all three counts of the underlying complaint in this case assert liability
“arising out of” the TCPA. Id. Thus, plaintiffs’ reliance on differences in the wording of the
exclusions in G.M. Sign and this case is unavailing.
¶ 79 Separately, the plaintiffs contend that “even if ICC had the exclusion language State
Farm did in G.M. Sign, Illinois duty to defend principles would still obligate a defense here.”
They argue that G.M. Sign contradicts the long-settled principle that an insurer is obligated to
defend its insured unless the complaint clearly alleges facts that would preclude coverage.
¶ 80 The plaintiffs note that this principle was recently reiterated by our court in Illinois Tool
Works Inc. v. Travelers Casualty & Surety Co., 2015 IL App (1st) 132350. That decision
discussed whether the insurer–who had issued policies to Illinois Tool Works between 1971 and
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1987–had a duty to defend various toxic tort cases by plaintiffs alleging exposure to Illinois Tool
Works’ products. Many of the underlying complaints alleged “that exposure to an Illinois Tool
product resulted in an injury, but d[id] not set forth when the exposure occurred or when the
injury manifested.” Id. ¶ 23.
¶ 81 Our court held that the insurer had a duty to defend these complaints, despite the absence
of any specific allegation that the plaintiffs’ exposure or injury had occurred during the time
when the insurer’s policies were in effect. In so holding, we recognized the “well-settled
principle” that “vague, ambiguous allegations against an insured should be resolved in favor of
finding a duty to defend.” Id. ¶ 26. We reiterated: “An insurer can only refuse to defend if the
allegations of the underlying complaint preclude any possibility of coverage. [Citation.] An
insurer may not refuse to defend its insured unless it is clear from the face of the underlying
complaint that the allegations fail to state facts which bring the case within, or potentially within,
the policy’s coverage. [Citation.]” Id. ¶ 27. Our court concluded that even if certain complaints
did not specify when the alleged injury occurred, “the ambiguous or unstated time period must
be resolved in favor of a duty to defend” as “[t]he bare allegations of the underlying complaints
leave open the possibility that the plaintiffs’ exposure or injury occurred during the policy
periods.” Id.
¶ 82 The plaintiffs urge that we must find a duty to defend in this case, pursuant to Illinois
Tool Works and other precedent regarding the liberal construction of a complaint’s allegations in
deciding an insurer’s duty to defend.
¶ 83 Notably, the Second District rejected such an argument in West Dundee. See West
Dundee, 2015 IL App (2d) 150016, ¶¶ 21-23. The West Dundee court reasoned that although
Illinois Tool Works recognized that ambiguous allegations should be resolved in favor of finding
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a duty to defend, under West Dundee’s facts “there [was] no factual uncertainty regarding time or
anything else that is relevant” where the “underlying three-count complaint alleges that, on one
specific date West Dundee faxed one specific unsolicited one-page advertisement.” Id. ¶ 23.
¶ 84 The same reasoning applies in this case. The allegations in the underlying complaint in
this case were not vague or ambiguous. Rather, all three counts were clearly predicated on the
same facts, i.e., Pat’s transmission of unsolicited fax advertisements on or about March 31, 2006.
Counts II and III of the complaint failed to plead any other wrongful acts, and explicitly
incorporated the same allegations that formed the basis of count I for violation of the TCPA.
Thus, as discussed above, all of the allegations clearly sought liability “arising out of” the TCPA,
implicating the TCPA exclusions.
¶ 85 We also acknowledge the plaintiffs’ argument that, whereas insurance policy terms
providing for coverage are to be construed liberally in favor of the insured and against the
insurer, providing a liberal construction to the terms of an exclusion has the opposite result of
narrowing coverage in favor of the insurer and against the insured. As plaintiffs note, our court
has held that a coverage exclusion should not be interpreted broadly in the same manner as a
term providing coverage, “because a broad interpretation *** would expand the exclusion to the
advantage of the insurer and would ‘turn on its head established judicial precedent regarding
liberal construction of insurance policies in favor of the insured.’ [Citation.]” United Services
Automobile Ass’n v. Dare, 357 Ill. App. 3d 955, 970 (2005); Oakley Transport, Inc. v. Zurich
Insurance Co., 271 Ill. App. 3d 716 (1995).
¶ 86 We recognize that the applicability of a policy exclusion “must be clear and free from
doubt” in order to relieve ICC of the duty to defend. Oakley, 271 Ill. App. 3d at 722. However, in
this case, we find that the TCPA exclusions unambiguously applied to the underlying complaint.
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As we stated in Oakley, although “we are mindful of our obligation to liberally construe any
doubts as to coverage in favor of the insured,” “we are not authorized to exercise our inventive
powers *** in order to create an ambiguity where none exists. We find the language at issue in
this case to be clear on its face.” Id. Similarly, in this case, we find that the application of the
TCPA exclusions is clear.
¶ 87 Moreover, the terms of the settlement agreement and judgment entered in the underlying
action indicate that the action was resolved on the basis of TCPA liability alone. It is apparent
that the amount of the underlying settlement, $1,818,000, was calculated by multiplying the
amount of $500 in statutory damages per TCPA violation by the number of fax advertisements
(3636) transmitted by Pat’s on or about March 31, 2006. As the Second District emphasized in
G.M. Sign, the plaintiffs cannot take advantage of a settlement premised on violation of the
TCPA and then assert that the complaint alleged liability independent of the TCPA. See G.M.
Sign, 2014 IL App (2d) 130593, ¶ 44 (“Having obtained the benefit of its settlement agreement
in the underlying litigation by taking the position that Schane sent unsolicited fax advertisements
in violation of the TCPA, G.M. Sign should not now be permitted to argue that State Farm owed
a duty to defend Schane because its amended complaint potentially included faxes that fell
outside of the TCPA.”).
¶ 88 Based on the foregoing, we conclude that the allegations of the underlying complaint
clearly implicated the TCPA exclusions. As a result, ICC did not have a duty to defend the
underlying action.
¶ 89 In turn, because ICC did not have a duty to defend, we reject the plaintiffs’ final
argument that “having breached the duty to defend, ICC is estopped to contest indemnity” of the
judgment following the settlement of the underlying action. “An insurer’s duty to indemnify is
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narrower than its duty to defend its insured.” Outboard Marine Corp. v. Liberty Mutual
Insurance Co., 154 Ill. 2d 90, 127 (1992). “Clearly, where there is no duty to defend, there will
be no duty to indemnify ***.” Crum & Forster Managers Corp. v. Resolution Trust Corp., 156
Ill. 2d 384, 398 (1993). As ICC had no duty to defend the underlying action, it had no duty to
indemnify the resulting judgment.
¶ 90 For the foregoing reasons, we affirm the judgment of the circuit court of Cook County.
¶ 91 Affirmed.
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Related
Cite This Page — Counsel Stack
2016 IL App (1st) 150873, 58 N.E.3d 830, Counsel Stack Legal Research, https://law.counselstack.com/opinion/fayezi-v-illinois-casualty-company-illappct-2016.