Pekin Insurance Company v. XData Solutions
2011 IL App (1st) 102769
Ill. App. Ct.2011Background
- XData sent an unsolicited advertising fax to Targin in 2005, allegedly violating the TCPA.
- Targin filed a class action in 2009 alleging TCPA violations, conversion, and Illinois Consumer Fraud claims.
- XData tendered defense to Pekin Insurance in 2009; Pekin declined coverage in March 2009.
- XData and Targin settled the class action for $1,975,000, to be funded from XData’s Pekin policy for 2005.
- The circuit court approved the settlement in June 2009, finding 4,673 unauthorized faxes were sent in 2005.
- Pekin filed a declaratory judgment action in 2009; the circuit court held Pekin owed defense and indemnity.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Advertising injury coverage for TCPA claim | Pekin argues TCPA claim cannot fall within advertising injury coverage. | XData argues TCPA fits within advertising injury since it concerns publication infringing privacy. | TCPA claim falls within advertising injury; Pekin must defend. |
| Property damage/occurrence coverage for intentional acts | Pekin contends no coverage for intentional fax transmission under property damage/occurrence. | XData argues Illinois policy treats such acts as covered under broad definitions. | Pekin had a duty to defend under property damage and occurrence provisions. |
| Indemnity and voluntary payments provision | Pekin argues settlement breached voluntary payments, relieving Pekin of indemnity. | XData contends settlement occurred after Pekin denied coverage; no breach and no need for Pekin’s consent. | No breach; Pekin liable for settlement; the policy’s voluntary payments clause not triggered. |
| Choice of law | Pekin prefers Indiana law on coverage for TCPA under advertising injury. | Illinois law governs because no Indiana authority on the issue; no conflict. | Illinois law applies; no conflict with Indiana law, so Illinois governs. |
Key Cases Cited
- Valley Forge Insurance Co. v. Swiderski Electronics, Inc., 223 Ill. 2d 352 (2006) (TCPA violation can trigger advertising injury coverage)
- Outboard Marine Corp. v. Liberty Mutual Insurance Co., 154 Ill. 2d 90 (1992) (duty to defend standard; liberal construction of policy ambiguities)
- Crumb & Forster Managers Corp. v. Resolution Trust Corp., 156 Ill. 2d 384 (1993) (interpretation of policy terms as a whole)
- Valley Forge Ins. Co. v. Swiderski Electronics, Inc., 223 Ill. 2d 352 (2006) (advertising injury includes right of privacy; TCPA coverage)
- American States Insurance Co. v. Capital Associates of Jackson County, Inc., 392 F.3d 939 (7th Cir. 2004) (privacy rights distinction rejected for policy interpretation)
- Westchester Fire Insurance Co. v. G. Heileman Brewing Co., 321 Ill. App. 3d 622 (2000) (voluntary payment doctrine and prejudice standard)
- Guillen v. Potomac Insurance Co. of Illinois, 203 Ill. 2d 141 (2003) (consent before settlement absent defense breach)
- Myoda Computer Center, Inc. v. American Family Mutual Insurance Co., 389 Ill. App. 3d 419 (2009) (defense duty vs indemnity scope)
- Ace Mortgage Funding, Inc. v. Travelers Indemnity Co. of America, No. 1:05-cv-1631-DFH-TAB, 2008 WL 686953 (N.D. Ind. 2008) (federal choice-of-law failure to identify state law)