436 F.Supp.3d 1092
N.D. Ill.2020Background
- Mesa Laboratories sent unsolicited fax advertisements to dozens of dental professionals.
- James L. Orrington filed a putative class action alleging TCPA and ICFA violations and common-law claims for conversion, nuisance, and trespass to chattels (consumption of ink/toner).
- Mesa settled Orrington’s action for $3.3 million and incurred substantial defense costs, then sought coverage from its insurer, Federal Insurance Company.
- Federal denied coverage, invoking: (1) an Intended/Expected exclusion (no "occurrence" because the sender expected depletion of recipients’ consumables) and (2) an Information Exclusion excluding TCPA and similar statutory violations and related information-transmission claims.
- Mesa sued Federal for breach of contract and bad faith; Federal moved for judgment on the pleadings under Rule 12(c).
- The court applied Illinois law, found both policy exclusions applicable, and granted judgment for Federal, holding it had no duty to defend or indemnify Mesa.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Choice of law: which state law governs interpretation | Mesa: conflict between Colorado and Illinois law over "occurrence"; apply Colorado | Federal: no meaningful conflict; apply forum (Illinois) | Court applied Illinois law; found no controlling conflict requiring Colorado law |
| Whether underlying claims allege an "occurrence" given Intended/Expected exclusion | Mesa: faxes were sent in good faith and welcomed; harm not intended | Federal: junk-fax senders know faxes consume recipients' paper/toner, so harm was expected, not accidental | Held: exclusion applies; the fax conduct was expected to deplete consumables, so no "occurrence" and no coverage |
| Whether the Information Exclusion bars coverage for common-law claims tied to TCPA allegations | Mesa: exclusion covers statutory/regulatory violations, not distinct common-law claims | Federal: common-law counts "arise out of" the alleged TCPA violation and are thus excluded | Held: exclusion applies; common-law claims arose from the same conduct as the TCPA claim and are excluded (following Fayezi) |
| Duty to defend/indemnify overall | Mesa: any potentially covered allegation would obligate insurer to provide full defense | Federal: exclusions clearly remove coverage for the underlying action | Held: Court granted judgment for Federal; no duty to defend or indemnify; case dismissed |
Key Cases Cited
- American States Ins. Co. v. Capital Assoc. of Jackson Cnty., Inc., 392 F.3d 939 (7th Cir. 2004) (holding junk-fax senders expect depletion of recipients' consumables, so no "occurrence")
- Fayezi v. Illinois Casualty Co., 58 N.E.3d 830 (Ill. App. Ct. 2016) (construing "arising out of" to bar common-law counts that rest on the same conduct as TCPA claims)
- Outboard Marine Corp. v. Liberty Mut. Ins. Corp., 607 N.E.2d 1204 (Ill. 1992) (insurance policy construction is a question of law)
- Maxum Indemn. Co. v. Eclipse Mfg. Co., 848 F. Supp. 2d 871 (N.D. Ill. 2012) (applies American States rationale to junk-fax consumables damage)
- Insurance Corp. of Hanover v. Shelborne Associates, 905 N.E.2d 976 (Ill. App. Ct. 2009) (recipient not injured by consumable use if fax was solicited or welcomed)
- In re Innovatio IP Ventures, LLC Patent Litig., 956 F. Supp. 2d 925 (N.D. Ill. 2013) (contracts should be interpreted to give effect to all provisions; exclusions must be read in context)