Maxum Indemnity Co. v. Eclipse Manufacturing Co.
848 F. Supp. 2d 871
N.D. Ill.2012Background
- This declaratory judgment case concerns whether insurers Maxum, Security, and FSIC must defend and/or indemnify M&M in the underlying TCPA/privacy-fax case Hinman v. M&M Rental Ctr., Inc.
- The underlying case settled; M&M assigned its claims to a plaintiff class led by Hinman and Italia Foods, and FSIC defended under a reservation of rights.
- Five summary judgment motions were filed; the underlying facts are largely undisputed, including dates of certain faxes and their alleged TCPA violations.
- FSIC bore defense costs and seeks reimbursement from Maxum and Security for costs incurred after they received notice of the underlying suit.
- The court must decide (i) whether FSIC owed a duty to defend, (ii) whether Maxum and Security owed a duty to defend and potentially indemnify, (iii) whether FSIC is entitled to equitable contribution, and (iv) the extent of indemnity, which remains open.
- Settlement proceedings in the underlying case produced a judgment and allocation among the five faxes, with FSIC contributing $100,000 to a trust for fax #5 and M&M agreeing to a total judgment of $5,817,150.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Duty to defend FSIC | FSIC contends it owed a defense under its policy terms. | FSIC had no duty to defend because the alleged injuries fell outside its coverage. | FSIC had no duty to defend. |
| Duty to defend Maxum and Security | Maxum/Security contend they owed a defense for TCPA/privacy claims under advertising injury. | Maxum/Security argue no duty due to policy limits and interpretation of invasion of privacy. | Maxum and Security had a duty to defend. |
| Equitable contribution | FSIC seeks recovery of defense costs from Maxum and Security after defending under reservation of rights. | Maxum/Security contest the amount and basis for reimbursement. | FSIC is entitled to reimbursement from Maxum and Security for post-notice defense costs. |
| Duty to indemnify | Indemnity should follow coverage for the settled claims. | Indemnity depends on whether the settlement adequately reflected covered claims. | Indemnity issues remain open; the court will allow further materials on reasonableness of settlement. |
Key Cases Cited
- Valley Forge Ins. Co. v. Swiderski Elecs., Inc., 860 N.E.2d 307 (Ill. 2006) (advertising injury can cover TCPA-related privacy interests)
- American States Ins. Co. v. Capital Assocs. of Jackson County, Inc., 392 F.3d 939 (7th Cir. 2004) (advertising injury coverage and privacy interests under TCPA)
- U.S. Fid. & Guar. Co. v. Wilkin Insulation Co., 578 N.E.2d 926 (Ill. 1991) (duty to defend resolved in favor of insured when reasonable doubt exists)
- St. Michael’s Orthodox Catholic Church v. Preferred Risk Mut. Ins. Co., 496 N.E.2d 1176 (Ill. App. 1986) (allocation and burden rules in insurance coverage disputes)
- Stonecrafters, Inc. v. Wholesale Life Ins. Brokerage, Inc., 915 N.E.2d 51 (Ill. App. 2009) (reasonableness standard for evaluating settlements in coverage disputes)