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G.M. Sign, Inc. v. State Farm Fire & Cas. Co.

2014 IL App (2nd) 130593 (Ill. App., 2014)

Words & Phrases

Duty To Defend: Exclusions

Trial Judge

Hon. Diane E. Winter and Hon. David M. Hall

Appellate Judge

Justice Zenoff

Holding

Policy exclusion for injuries arising out of violation of the Telephone Consumer Protection Act applied to claims of conversion and consumer fraud against insured.

Fact Summary

 

In an underlying blast-fax action where plaintiff settled its claim by agreeing to satisfy the judgment it obtained against the underlying defendant, who violated the Telephone Consumer Protection Act, from the insurance policy issued by the defendant insurer in the instant declaratory judgment action, the trial court erred in entering summary judgment for plaintiff, since the policy’s specific exclusion of claims under the Act applied to the claims for conversion and consumer fraud in plaintiff’s amended complaint, especially when plaintiff would be unable to prove defendant in the underlying action was liable on the conversion and consumer fraud claims without also proving a violation of the Act, and plaintiff’s attempt to recharacterize the class action it had already litigated and settled in order to obtain insurance coverage could not be condoned.

The facts pertinent to this appeal are taken from the present record and from this court’s opinion in G.M. Sign, Inc. v. Schane, 2013 IL App (2d) 120434. The appeal in Schane arose out of the underlying blast-fax litigation, in which G.M. Sign pursued a class action against Michael Schane and his company, Academy Engraving Company, for sending unsolicited fax advertisements.

On October 1, 2010, G.M. Sign entered into a settlement agreement with Schane. In the agreement, the parties stipulated to a class consisting of “all persons to whom [Schane] sent advertising facsimiles during the period of September 7, 2007 through June 17, 2008.”2 The settlement agreement noted that, during that period, Schane faxed a total of 49,825 advertisements to the class members without their prior express permission. It further recited 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” and that “such a judgment would bankrupt [Schane] and cause the dissolution of his business.” Schane agreed to have judgment entered against him in the amount of $4.9 million, which settled “all disputes between [Schane] and the class.” The agreement also provided that G.M. Sign and the class would not execute on the judgment against Schane personally, but would satisfy the judgment only from his State Farm insurance policy.

On November 12, 2010, G.M. Sign sought leave to file an amended complaint, the admitted purpose of which was to “ ‘plead into possible insurance coverage available under Schane’s insurance policies.’ ” Schane, 2013 IL App (2d) 120434, ¶ 7. The motion was granted, and G.M. Sign filed the amended complaint on November 18, 2010. It asserted largely the same preliminary allegations as the original complaint. However, instead of alleging that G.M. Sign had received a fax advertisement and that the class members had received “the same or similar advertisements,” the amended complaint alleged that G.M. Sign had received an “unsolicited facsimile” and that the class members had received “the same or similar unsolicited facsimiles.” Furthermore, although count I of the amended complaint incorporated by reference all of the preliminary factual allegations, counts II and III (alleging conversion and consumer fraud) incorporated only those factual allegations that contained no reference to the TCPA.

Additionally, the proposed classes for counts II and III of the amended complaint had been changed. The class for count II was “[a]ll persons who on or after five years prior to the filing of this action, were sent telephone facsimile messages by or on behalf of [Schane].”



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