Fayezi v. Illinois Casualty Company
58 N.E.3d 830
Ill. App. Ct.2016Background
- Pat’s Pizzeria (insured) sent unsolicited fax advertisements on March 31, 2006 to 3,636 recipients; Fayezi filed a class action alleging violation of the TCPA, conversion, and Illinois Consumer Fraud Act.
- Illinois Casualty Company (ICC) issued a Businessowners Policy for 2005–06 that contained exclusions for any liability or legal obligation "arising out of" the TCPA for both bodily injury/property damage and personal/advertising injury.
- Pat’s tendered defense to ICC; ICC denied coverage based on the TCPA exclusions. Pat’s settled the underlying class action and assigned insurance rights to the class; the settlement and judgment ($1,818,000) were premised on TCPA statutory damages.
- Plaintiffs (Pat’s assignee and Fayezi) sued ICC for declaratory relief in Lake County, alleging duty to defend and indemnify and later amended to allege prior policies (without the TCPA exclusion) and failure to give notice of a coverage reduction. ICC moved to dismiss under 735 ILCS 5/2-615 and 2-619, submitting a sworn affidavit (Doran) that no earlier policies existed.
- The trial court, relying on the Doran affidavit and controlling Second District precedent, dismissed the amended complaint with prejudice; the appellate court affirmed, holding the TCPA exclusions unambiguously barred coverage and ICC had no duty to defend or indemnify.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the court could consider ICC’s affidavit and deny discovery on prior-policy allegations | Fayezi/American Awning: affidavit raised factual dispute; discovery was required (Rule 191(b) not yet used) | ICC: Doran affidavit raised affirmative matter under §2-619; plaintiffs failed to file a Rule 191(b) counteraffidavit so affidavit facts are admitted | Court: affidavit was proper §2-619 support; plaintiffs’ failure to file a Rule 191(b) affidavit or counteraffidavit waived discovery and admitted affidavit facts |
| Whether the TCPA exclusions in the 2005–06 policy barred ICC’s duty to defend the underlying suit | Plaintiffs: exclusions are narrower and do not bar common-law claims (conversion/consumer fraud) even if based on same conduct; ambiguous allegations should be resolved for coverage | ICC: exclusions (broad "arising out of" language) bar coverage for any liability based on the TCPA-related fax conduct; G.M. Sign and West Dundee control | Court: all underlying counts arise out of the TCPA fax conduct; exclusions unambiguous and bar duty to defend |
| Whether settlement/judgment premised on TCPA damages could be recovered from ICC despite exclusions | Plaintiffs: ICC breached duty to defend and is estopped from contesting indemnity | ICC: no duty to defend → no duty to indemnify; estoppel inapplicable | Court: indemnity duty narrower than defense; no duty to defend means no duty to indemnify; estoppel fails |
| Whether differences in exclusion wording (this policy vs. State Farm in G.M. Sign) require different result | Plaintiffs: ICC wording excludes liability "arising out of the TCPA" only, not all claims premised on same conduct; G.M. Sign distinguishable | ICC: difference immaterial; both exclusions are broad enough to bar coverage where complaint pleads only TCPA-based facts | Court: wording differences not material; precedent applying "arising out of" language controls; exclusion applies |
Key Cases Cited
- Piser v. State Farm Mut. Auto. Ins. Co., 405 Ill. App. 3d 341 (Ill. App. 2010) (affidavit supporting §2-619 can present affirmative matter that bars claim; failure to file counteraffidavit admits affidavit facts)
- Oakley Transport, Inc. v. Zurich Ins. Co., 271 Ill. App. 3d 716 (Ill. App. 1995) (policy exclusions must be clear to relieve insurer of duty to defend; court will not create ambiguity)
- Outboard Marine Corp. v. Liberty Mut. Ins. Co., 154 Ill. 2d 90 (Ill. 1992) (duty to indemnify is narrower than duty to defend)
- Crum & Forster Managers Corp. v. Resolution Trust Corp., 156 Ill. 2d 384 (Ill. 1993) (no duty to indemnify where no duty to defend)
- Maryland Cas. Co. v. Chicago & N. W. Transp. Co., 126 Ill. App. 3d 150 (Ill. App. 1984) ("arising out of" analysis is a but-for inquiry)
- American Economy Ins. Co. v. DePaul Univ., 383 Ill. App. 3d 172 (Ill. App. 2008) (same but-for approach for "arising out of" coverage questions)