994 F.3d 865
7th Cir.2021Background
- Mesa Laboratories sent unsolicited fax advertisements to dental offices without required TCPA opt-out notices.
- James Orrington filed a putative class action alleging violations of the TCPA and the Illinois Consumer Fraud and Deceptive Business Practices Act (ICFA), plus common-law claims of conversion, nuisance, and trespass to chattels based on the same fax-sending conduct.
- Mesa tendered defense to its insurer, Federal Insurance Company; Federal refused, invoking an "Information Laws Exclusion" that bars coverage for claims "arising out of" the TCPA.
- Mesa settled the underlying suit and sued Federal for breach of contract, bad faith, and statutory unfair-claims practices; Federal moved for judgment on the pleadings.
- The district court granted judgment for Federal, concluding the Information Laws Exclusion bars coverage for the common-law claims because they arise from the same conduct as the TCPA violation; the Seventh Circuit affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether an exclusion barring claims "arising out of" the TCPA excludes common-law claims based on the same conduct | Orrington/Mesa argued common-law claims are distinct legal theories and thus not covered by an exclusion that names a statute | Federal argued "arising out of" excludes the underlying conduct that gave rise to the TCPA claim, so related common-law claims are excluded | The court held the exclusion applies to the common-law claims because they "arise out of" the same conduct (but-for test) |
| Whether insurer had a duty to defend when at least one claim might be outside coverage | Mesa argued that if any claim could fall within coverage, Federal owed a defense | Federal argued all claims are excluded and thus no duty to defend | Court applied Illinois duty-to-defend standards and concluded exclusion clearly precluded coverage, so no duty to defend |
| Which state law governs interpretation of the policy | Mesa suggested Colorado law might apply; noted lack of Colorado decisions on point | Federal relied on Illinois law as the forum state's law | Court found no true conflict between Illinois and Colorado on this issue and applied Illinois law |
Key Cases Cited
- Zurich Am. Ins. Co. v. Ocwen Fin. Corp., 990 F.3d 1073 (7th Cir. 2021) ("arising out of" exclusion bars all claims based on the underlying conduct that violates an enumerated law, regardless of legal theory)
- G.M. Sign, Inc. v. State Farm Fire & Cas. Co., 18 N.E.3d 70 (Ill. App. Ct. 2014) (uses a but‑for inquiry to determine whether claims "arise out of" excluded conduct)
- Outboard Marine Corp. v. Liberty Mut. Ins., 607 N.E.2d 1204 (Ill. 1992) (compare underlying complaint facts to policy language to decide duty to defend)
- Health Care Indus. Liab. Ins. Program v. Momence Meadows Nursing Ctr., Inc., 566 F.3d 689 (7th Cir. 2009) (if any claim is covered, insurer must defend entire suit)
- Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487 (1941) (federal courts in diversity apply forum state's choice-of-law rules)
- Landmark Am. Ins. Co. v. Hilger, 838 F.3d 821 (7th Cir. 2016) (standard of review for judgment on the pleadings is de novo)