357 F. Supp. 3d 659
E.D. Ill.2018Background
- Zurich issued CGL and umbrella policies to Ocwen covering various periods, including a 2013–14 CGL policy and a contemporaneous umbrella policy with excess-follow-form language.
- Beecroft sued Ocwen (Beecroft Action) alleging TCPA calls, FDCPA and FCRA violations, credit defamation, and invasion of privacy (including an allegation that stress from collection calls contributed to a miscarriage); Snyder sued separately asserting TCPA and FDCPA claims; the actions were consolidated.
- Ocwen tendered defense/indemnity to Zurich for the consolidated underlying litigation; Zurich denied coverage and refused to defend.
- Zurich sued for declaratory judgment that it had no duty to defend; Ocwen counterclaimed for breach of contract. Both parties moved for judgment on the pleadings under Rule 12(c) on the duty-to-defend issue.
- The 2013–14 CGL policy provided Coverage A (bodily injury) and Coverage B (personal and advertising injury) but included broad exclusions for claims “directly or indirectly arising out of” statutes regulating communication or information (enumerating TCPA, FCRA, FACTA and a catch-all). The umbrella policy contained substantially similar exclusions and excess-follow-form language.
Issues
| Issue | Plaintiff's Argument (Zurich) | Defendant's Argument (Ocwen) | Held |
|---|---|---|---|
| Whether Beecroft’s Counts IV (credit defamation) and V (invasion of privacy/ intrusion on seclusion and alleged miscarriage) potentially fall within Coverage A or B of the 2013–14 policy | Zurich argued the claims fall within Coverage A/B factual categories but that exclusions apply and bar coverage | Ocwen argued Counts IV and V allege bodily injury and personal/advertising injury within Coverage A/B and hence trigger a duty to defend | Court found Counts IV and V alleged covered types of injury but rejected coverage because exclusions applied; Zurich has no duty to defend |
| Whether the policy exclusions for claims “arising out of” TCPA, FCRA, FACTA, or statutes regulating dissemination of information (Exclusion 1) unambiguously bar coverage | Zurich: Exclusion 1 covers the conduct pleaded (robocalls, improper credit-report access/communications) and therefore precludes duty to defend | Ocwen: Exclusion 1 is ambiguous or inapplicable to common-law invasion/defamation claims; narrower exclusions should be read to preserve coverage | Court held Exclusion 1 applies and is not ambiguous in context; it bars coverage because the injury ‘‘arose out of’’ TCPA/FCRA/related communication statutes |
| Whether a narrower exclusion (Exclusion 2) or any conflict between exclusions preserves coverage | Zurich: Exclusion 2 is consistent with Exclusion 1 and also bars coverage; no meaningful conflict exists | Ocwen: Exclusion 2 is narrower and should be read to allow coverage for some common-law claims | Court held exclusions are harmonious and, even if read narrowly, Exclusion 2 also precludes coverage for the pleaded FDCPA/FCRA/TCPA-related claims |
| Whether the umbrella policy imposes a duty to defend if the CGL policy excludes coverage | Ocwen: Umbrella’s excess/umbrella coverage should kick in if primary CGL coverage is excluded | Zurich: Umbrella contains a materially similar exclusion and follows the same result | Court held umbrella policy’s exclusion mirrors the CGL exclusion; umbrella does not obligate Zurich to defend |
Key Cases Cited
- Alexander v. City of Chicago, 994 F.2d 333 (7th Cir.) (standard for Rule 12(c) akin to summary judgment)
- Twenhafel v. State Auto Prop. & Cas. Ins. Co., 581 F.3d 625 (7th Cir.) (policy interpretation is a question of law)
- Santa's Best Craft, LLC v. St. Paul Fire & Marine Ins. Co., 611 F.3d 339 (7th Cir.) (duty to defend arises if underlying complaint potentially falls within coverage)
- Panfil v. Nautilus Ins. Co., 799 F.3d 716 (7th Cir.) (ambiguities in overlapping exclusions construed for insured)
- G.M. Sign, Inc. v. State Farm Fire & Casualty Co., 18 N.E.3d 70 (Ill. App.) (exclusion for claims ‘‘arising out of’’ TCPA/FCRA can bar coverage)
- Ryerson, Inc. v. Federal Ins. Co., 676 F.3d 610 (7th Cir.) (mend-the-hold / changing litigation positions)
- Allstate Ins. Co. v. Menards, Inc., 285 F.3d 630 (7th Cir.) (federal courts should follow state intermediate appellate decisions absent indication state supreme court would rule differently)
- Pekin Ins. Co. v. Equilon Enterprises LLC, 980 N.E.2d 1139 (Ill. App.) (construing multiple endorsements/exclusions together)
- Hurst-Rosche Eng'rs, Inc. v. Commercial Union Ins. Co., 51 F.3d 1336 (7th Cir.) (insurer bears burden to show exclusion applies)