OPINION AND ORDER
This case involves whether three insurers had the duty to defend and indemnify their insured in an underlying case, Hinman v. M & M Rental Center, Inc., No. 06 C 1156, which was pending in this district before Judge Elaine Bucklo until it settled and a final order of judgment was entered October 6, 2009. Maxum Indemnity Company (“Maxum”) and Security Insurance Company of Hartford (“Security”) seek a declaratory judgment that they did not have the duty to defend and need not indemnify M & M Rental Center, Inc. (“M & M”). M & M filed a counterclaim seeking declarations that Maxum and Security had the duty to defend and must indemnify M & M in the underlying litigation. First Specialty Insurance Corporation (“FSIC”) filed an intervening complaint seeking a declaration that FSIC did not have the duty to defend or indemnify M & M and that Maxum and Security have the duty to defend and indemnify M & M. FSIC also requests equitable contribution from Maxum and Security for the costs it expended in defending M & M in the underlying suit. Robert Hinman and Italia Foods, Inc. (“Italia Foods”), plaintiffs in the underlying litigation, also filed counter-claims and cross-claims seeking declarations that Maxum, Security, and FSIC have the duty to defend and indemnify M & M.
As part of the settlement, M & M assigned the right to pursue its claims against Maxum and Security in this declaratory judgment action to the plaintiff class, represented by Hinman and Italia Foods.
Five motions for summary judgment are presently before the court. Despite the large volume of the motion papers, the facts are largely undisputed and the legal arguments repeated from one brief to another. For the following reasons, the court concludes that Maxum and Security had the duty to defend M & M while FSIC
BACKGROUND
1. The Maxum Policy
Maxum issued a commercial general liability policy to M & M covering the period from February 1, 2004 to February 1, 2005. As relevant to this litigation, the Maxum policy provides coverage for bodily injury, property damage, personal injury, and advertising injury, all terms specifically defined in the policy. Property damage is defined as “[pjhysical injury to tangible property, including all resulting loss of use of that property” and “loss of use of tangible property that is not physically injured.” Ex. A to Cunningham Aff. at M & M337 (hereinafter, “Maxum Policy”). The damage must be due to an occurrence, ie. “an accident, including continuous or repeated exposure to substantially the same general harmful conditions,” id. at M & M336, that occurred during the policy period, id. at M & M322. Expected or intended injury is excluded from coverage. Id. at M & M322. Advertising injury includes “[o]ral or written publication of material that violates a person’s right of privacy.” Id. at M & M334. As with coverage for property damage, the advertising injury must be the result of an offense committed during the policy period. Id. at M & M328.
While Maxum has a duty to defend its insured against suits seeking damages to which the insurance policy applies, the duty is qualified by an allocation provision for mixed claims:
In the event that a claim or “suit” seeks “damages,” some of which are covered and others of which are not covered by this policy, the Insured must agree to a reasonable allocation of the costs and fees of defense, and the Insured will be responsible for payment of the costs and fees to defend the “damages” or claims not covered by this policy. This agreement shall be reached in writing, signed by the insurer and the Insured, prior to the date when a responsive pleading to the claim or “suit” is filed on behalf of the Insured. In the absence of such agreement, our duty to defend will only apply to those specific portions of the “suit” which are covered.2
Maxum Policy at M & M322, M & M328.
II. The Security Policy
Security’s predecessor in interest, Fire and Casualty Company of Connecticut, issued five commercial general liability policies to M & M effective from February 1, 2000 to February 1, 2004 (collectively, “the Security policy”).
III. The FSIC Policy
FSIC issued a commercial insurance policy to M & M covering the period from February 1, 2005 to February 1, 2006. M
injury including consequential “bodily injury” arising out of one or more of the following offenses:
a. False arrest, detention or imprisonment;
b. Malicious prosecution;
c. The wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling or premises that a person occupies, committed by or on behalf of its owner landlord or lessor; or
d. Oral or written publication of material that slanders or libels a person or organization or disparages a person’s or organization’s goods, products or services.
Ex. T to Smith Aff. at FSIC 01025. Invasion of privacy is not included within this list.
IV. The Underlying Litigation
The class action complaint, filed November 14, 2005 by Eclipse Manufacturing Company (“Eclipse”), included claims for violation of the Telephone Consumer Protection Act (“TCPA”), 47 U.S.C. § 227, and the Illinois Consumer Fraud and Deceptive Business Practices Act (“ICFA”), 815 Ill. Comp. Stat. 505/2, and for common law conversion, all arising from the transmission of an unsolicited advertisement by M & M to Eclipse on June 23, 2005. A first amended complaint dropped the conversion and ICFA claims, focusing instead on the alleged TCPA violation that occurred upon the transmission of the June 23, 2005 fax.
All persons who (1) on or after four years prior to the filing of this action, (2) were sent telephone facsimile messages of material advertising the commercial availability of any property, goods, or services by or on behalf of [M & M], and (3) with respect to whom [M & M] cannot provide evidence of prior express permission or invitation for the sending of such faxes.
Id. at ¶ 14. It claimed that the purported plaintiff class was damaged by M & M’s actions because receipt of the fax “caused them to lose paper and toner,” “prevented Plaintiffs fax machine from being used for Plaintiffs business purposes during the time [M & M] was using Plaintiffs fax machine for [M & M’s] illegal purpose,” and “cost Plaintiff employee time, as Plain
After it was discovered that Eclipse had assigned the right to proceed with the action against M & M to Hinman, who was formerly Eclipse’s sole owner, shareholder, and president, Hinman, as assignee, and Italia Foods filed a second amended complaint against M & M on June 15, 2007. The second amended complaint alleged that M & M sent unsolicited faxes on October 29, 2004 and June 23, 2005, and “on information and belief’ on other occasions. Ex. C to Cunningham Aff. ¶¶ 11-14. The class definition remained the same. The sending of unsolicited faxes was said to damage recipients in the following ways:
A junk fax recipient loses the use of its fax machine, paper, and ink toner. An unsolicited fax wastes the recipient’s valuable time that would have been spent on something else. A junk fax interrupts the recipient’s privacy.6 Unsolicited faxes prevent fax machines from receiving authorized faxes, prevent their use for authorized outgoing faxes, cause undue wear and tear on the recipient fax machines, and require additional labor to attempt to discern the source and purpose of the unsolicited message.
Id. at ¶ 3. The October 29, 2004 fax was not attached to the complaint but was later produced in discovery. This fax offered M & M’s help with holiday parties and special events,
Prior to the filing of the second amended complaint, Judge Bucklo had to determine whether Hinman had standing to pursue Eclipse’s claims. She concluded that he did, as a corporation could assign its TCPA claims. Eclipse Mfg. Co. v. M & M Rental Ctr., Inc.,
In their subsequent motion for class certification, Hinman and Italia Foods claimed that M & M sent unsolicited advertisements to the class on June 24, 2002, September 15, 2003, November 5, 2003, October 29, 2004, and June 23, 2005. On April 7, 2008, Judge Bucklo certified a class defined as
[a]ll persons who, on or after four years prior to the filing of this action, were sent, without permission, telephone facsimile messages of material advertising the commercial availability of any property, goods, or services by or on behalf of [M & M].
Hinman v. M & M Rental Ctr., Inc.,
The parties in the underlying litigation then filed cross-motions for summary judgment, which Judge Bucklo granted in part and denied in part on January 27, 2009. Hinman v. M & M Rental Ctr., Inc.,
After the summary judgment order was entered, Hinman and Italia filed a motion to reconsider, arguing that there was a genuine issue of fact as to whether faxes # 1-3 were advertisements. M & M also sought reconsideration, claiming that because Hinman and Italia Foods had failed to provide adequate notice of the lawsuit to the class prior to the summary judgment ruling, damages should only be awarded for the two faxes the named plaintiffs received. The parties agreed to stay briefing on these post judgment motions pending settlement discussions. All parties in the underlying litigation and this coverage action then participated in an unsuccessful settlement conference. A subset of the parties, Hinman, Italia Foods, M & M, and FSIC, resumed settlement discussions that ultimately proved fruitful. The settlement agreement provided that M & M would consent to entry of judgment against it for $5,817,150. This amount was apportioned to the five faxes, with $685,350 allocated to fax # 1, $643,200 to fax # 2, $626,100 to fax # 3, $1,972,000 to fax # 4, and $1,890,500 to fax # 5.
V. Coverage of the Underlying Action
On December 20, 2005, FSIC agreed to defend M & M in the underlying litigation pursuant to a reservation of rights. Due to FSIC’s reservation of rights, M & M controlled its own defense but was reimbursed for its costs in accordance with FSIC’s billing guidelines. As of November 19, 2009, FSIC had incurred $643,134.05 in costs and fees in defending M & M in the underlying litigation. By July 27, 2006, Maxum and Security had notice of the underlying litigation. $576,207.60 of the defense costs were incurred on or after this date.
On September 13, 2006, Maxum and Security filed this declaratory judgment action. $547,553.23 of the total defense costs were incurred on or after that date. FSIC was given leave to intervene in this action on November 5, 2008. Hinman and Italia Foods were added as defendants on December 3, 2007 but were not served until March 11, 2009. Their counsel, however, received the complaint on December 3, 2007 and actively participated despite Hinman and Italia Foods not being served.
VI. The Leads List
One of the few relevant factual disputes in this case involves whether the underlying plaintiff class is composed solely of business entities or also includes natural persons. The class was defined to include “all persons” who received fax advertisements. These advertisements were sent to fax numbers contained on the leads list. The leads list includes four columns, headed “ref,” “type,” “addr,” and “header.” Ex. E to Cunningham Aff. The “ref’ column generally contains company names, although it also includes the names of individuals without an accompanying company or entity name. For example, Henry Bechstein, Phillip R. Suth, and Ronald S. Jacobson are all listed in the “ref’ column with no indication that the names refer to anything or anyone other than natural persons. The “type” column identifies that the number provided in the “addr” column is a fax number. The “header” column provides a contact name to whom the faxes were addressed.
Berk testified that the faxes he sent to contacts on the leads list were sent to companies. Judge Bucklo, in her now vacated summary judgment order, with no mention of natural persons, referred to the faxes as having been sent to companies. Further discovery regarding the leads list was not undertaken in this litigation.
LEGAL STANDARD
Summary judgment obviates the need for a trial where there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). To determine whether any genuine issue of fact exists, the court must pierce the pleadings and assess the proof as presented in depositions, answers to interrogatories, admissions, and affidavits that are part of the record. Fed.R.Civ.P. 56(c) & advisory committee’s notes. The party seeking summary judgment bears the initial burden of proving that there is no genuine issue of material fact. Celotex Corp. v.
ANALYSIS
I. Duty to Defend
Under Illinois law, “an insurer’s duty to defend is determined by comparing the allegations in the underlying complaint to the relevant provisions of the insurance policy.” LaGrange Mem’l Hosp. v. St. Paul Ins. Co.,
A. Property Damage Coverage
The FSIC, Maxum, and Security policies contain the same property damage provision. Coverage exists for property damage caused by an occurrence as long as the damage is not expected or intended by the insured. The underlying complaint alleged that a recipient of unauthorized faxes “loses the use of its fax machine, paper, and ink toner.” Ex. C to Cunningham Aff. ¶ 3. The Seventh Circuit, in considering the identical situation, concluded that property damage coverage clearly does not apply to this loss as the senders of the faxes anticipate that the recipient’s paper and toner will be used upon receipt of the fax. Am. States Ins. Co. v. Capital Assocs. of Jackson County, Inc.,
B. Personal and Advertising Injury Coverage
1. FSIC
The FSIC policy provides coverage for personal and advertising injury in only limited circumstances. Specifically, coverage is provided for false arrest, detention, or imprisonment; malicious prosecution; wrongful eviction, entry, or invasion; and slander, libel, or disparagement. Invasion of privacy, the only potential advertising injury at issue in the underlying suit, is not covered. Because the allegations in the underlying complaint do not fall even potentially within FSIC’s personal and advertising injury coverage, FSIC did not owe M & M the duty to defend.
2. Maxum and Security
Unlike FSIC, whose policy included an endorsement narrowing the scope of its advertising injury coverage, the Maxum and Security policies include invasion of privacy as a covered offense. Maxum and Security nonetheless contest whether the allegations of the complaint gave rise to a potentially covered invasion of privacy claim. They first argue that the TCPA blast fax provision does not protect privacy interests. This argument, however, has been rejected by both the Seventh Circuit and the Illinois Supreme Court. See Valley Forge Ins. Co. v. Swiderski Elecs., Inc.,
In American States, the Seventh Circuit, in the absence of an Illinois Supreme Court decision on the issue, held that an advertising injury provision that covers violations of privacy does not create a duty to defend TCPA fax-ad claims. The court reasoned from common law doctrines that invasion of privacy may relate to an interest in secrecy or an interest in seclusion. It concluded that a recipient’s interest in secrecy is not invaded because no publication of the recipient’s private information has occurred. Id. at. 942. Whatever “slight interest” in seclusion a recipient might have, the court found that the word privacy in the insurance policy at issue “strongly implies that coverage is limited to secrecy interests” in that “[i]t covers a ‘publication’ that violates a right of privacy.” Id.
In Valley Forge, the Illinois Supreme Court rejected the approach taken by American States.
Maxum and Security maintain that Valley Forge is distinguishable under the particular facts of the underlying case. They note that the plaintiff in American States was a corporation whereas the plaintiff in Valley Forge was an individual “doing business as” a corporation. Maxum and Security conclude that Valley Forge therefore did not affect the Seventh Circuit’s holding that a claim brought by a corporation is not covered. The court disagrees. Valley Forge explicitly “decline[d] to follow” American States. Id. at 323,
Moreover, the Illinois Supreme Court could readily have distinguished the case before it on the basis that the underlying plaintiff in American States was a corporation, but it did not. See Pekin Ins. Co. v. XData Solutions, Inc.,
Maxum’s and Security’s argument that the policy language only provides coverage for individuals’ as opposed to organizations’ rights is unavailing. The Maxum and Security policies state that injury arising from the publication of material that violates “a person’s right to privacy” is covered. Another covered advertising injury is that which results from the publication of material “that slanders or libels a person or organization or disparages a person’s or organization’s goods, products or services.” Maxum Policy at M & M334. Maxum and Security argue that only provisions referring to both persons and organizations are intended to cover business entities. Where the term “person” is not defined in an insurance policy, however, it is given its plain and ordinary meaning. Supreme Laundry Serv., L.L.C. v. Hartford Cas. Ins. Co.,
This does not end the inquiry, however, as the duty to defend was only triggered if the alleged privacy violation occurred while the policies were in effect. Maxum does not dispute this, but Security argues that the underlying complaint contained no allegations that an advertisement violating the TCPA was sent during its policy periods. While the initial and amended complaints in the underlying action specify only two dates on which faxes were sent, October 29, 2004 and June 23, 2005, both outside of Security’s policy periods, the class definition used throughout includes persons who received faxed advertisements from M & M beginning in 2001. The second amended complaint also alleges that M & M sent unsolicited advertisements to Eclipse and Italia Foods “on other occasions.” Ex. C to Cunningham Aff. ¶ 14. These allegations raised the possibility that advertisements in violation of the TCPA were sent while Security’s policies were in effect.
Security claims that extrinsic evidence, specifically Judge Bucklo’s now vacated summary judgment order finding no TCPA violation for faxes # 1-3, establishes that the only alleged TCPA violations occurred outside Security’s policy period. Judge Bucklo based her ruling on the absence of copies of faxes # 1-3, despite there being circumstantial evidence that the faxes sent during Security’s policy period constituted advertisements as defined by the TCPA. Using Judge Bucklo’s order as evidence that no duty to defend existed under the Security policy effectively equates the duty to defend with the duty to indemnify, as the order goes to an ultimate fact in the underlying case — whether the faxes sent during the Security policy period were advertisements under the TCPA. There is no question, however, that faxes were sent during the policy period. Accordingly, Maxum and Security had the duty to defend under the advertising injury provisions in their policies.
C. Equitable Contribution
FSIC defended M & M in the underlying suit pursuant to a resexwation of rights. It now seeks to recover the defense costs incurred on or after Maxum and Security received notice of the underlying suit on July 27, 2006 totaling $576,207.60. Equitable contribution “as it pertains to insurance law is an equitable principle arising among coinsurers which
A volunteer is one who has made a payment not under compulsion, legal obligation, or to preserve its rights. See Progressive Ins. Co. v. Univ. Cas. Co.,
II. Duty to Indemnify
The duty to indemnify is narrower than the duty to defend. Outboard Marine Corp. v. Liberty Mut. Ins. Co.,
Here, the key issue is whether the settlement was entered into in reasonable anticipation of liability.
Although Judge Bucklo held a fairness hearing on the settlement agreement and entered findings that the settlement amount agreed to was “what a reasonably prudent person in [M & M’s] position would have settled for on the merits of the claims in this Litigation” and that M & M conformed to the standard of a prudent uninsured in deciding to settle, Ex. Q to Cunningham Aff. ¶ 10, this does not satisfy Hinman and Italia Foods’ burden. See Stonecrafters, Inc. v. Wholesale Life Ins. Brokerage, Inc.,
Maxum and Security argue that M & M could not have anticipated that it would be liable to class members who are business entities when it agreed to the settlement. They emphasize that when Judge Bucklo granted Hinman and Italia’s motion for leave to file a second amended complaint she concluded that Eclipse could only assign claims based on its property interest in the TCPA because a corporation lacks the seclusion interest that is protected by the TCPA. See Eclipse Mfg. Co.,
It appears that the parties did not raise this issue again during the course of the proceedings, however, as neither Judge Bucklo’s ruling on class certification nor her summary judgment order distinguishes between claims brought by corporations or claims brought by individuals. Thus, it is unlikely that the parties who settled the underlying litigation were focused on whether the plaintiff class was composed of business entities as well as individuals. It can readily be inferred, as well, that because Valley Forge was decided before the negotiations leading to the settlement, the parties knew that the court of last resort on insurance coverage had decided that “advertising injury” includes interests protected by TCPA and that an appeal in this case could result in the abrogation of American States on this issue. Nevertheless, the language in Judge Bucklo’s ruling on the motion to amend the complaint is enough to create a genuine issue of fact as to whether M & M reasonably anticipated liability for faxes sent to business entities. Moreover, the record is not well-developed on this issue. Compare with Pietras v. Sentry Ins. Co.,
In addition, Security argues that M & M did not act in reasonable anticipation of liability in agreeing to settle claims related to faxes # 1-3 because Judge Bucklo had already found in M & M’s favor on these faxes. While the summary judgment order was vacated as part of the settlement, the fact that no copies of faxes # 1-3 were ever produced remains unchanged. Hinman and Italia Foods respond by referencing the circumstantial evidence they had produced that at least, in their opinion, created a genuine issue of material fact as to whether faxes # 1-3 were advertisements. This evidence included Berk’s testimony on the purpose of purchasing the leads list, copies of fliers created by M & M that could not be connected to a particular fax transmission, and records showing that faxes were sent to the leads list on dates corresponding to faxes # 1-3. Hinman and Italia Foods argue that, despite Judge Bucklo’s contrary summary judgment ruling, M & M could have reasonably anticipated incurring liability on faxes # 1-3 because Hinman and Italia Foods had filed a motion for reconsideration contending that there was a genuine dispute as to faxes # 1-3. Alternatively, M & M faced the possibility of an appeal, further drawing out the litigation. Hinman and Italia Foods also emphasize the reasonableness of the amount for which the claims for faxes # 1-3 were compromised, as $150 per fax in damages is well below the $500 per fax provided by statute. This discount may have been an acknowledgment of the comparative weakness of the evidence for these three faxes as compared to that for faxes # 4 and # 5. Although Hinman and Italia Foods’ argument as to reasonableness is something of a stretch, they have at least raised a genuine dispute about it. Summary judgment will be denied on the issue of indemnity and the parties will be given the opportunity to submit additional materials on the issue of the reasonableness of the settlement.
CONCLUSION AND ORDER
For the foregoing reasons, FSIC’s motion [#246] is granted. Maxum’s motion
FSIC had no duty to defend M & M in the underlying suit, while Maxum and Security did. Maxum and Security must reimburse FSIC for the costs and fees it incurred in defending M & M on or after July 27, 2006. Maxum and Security are instructed to attempt to reach an agreement as to the proper allocation of these defense costs between them.
This case will be called for a status hearing on February 16, 2012 at 8:30 a.m.
Notes
. As matters between M & M, Hinman, Italia Foods, and FSIC were resolved by the settlement agreement in the underlying case, claims raised in this litigation involving these parties are moot.
. This differs from the default rule in Illinois, which is that if there is a duty to defend one claim, the insurer must defend all claims. See U.S. Fid. & Guar. Co. v. Wilkin Insulation Co.,
. More specifically, the individual policies covered the following periods: February 1, 2000 to February 1, 2001; February 1, 2001 to February 1, 2002; February 1, 2002 to April 3, 2002; April 3, 2002 to February 1, 2003; and February 1, 2003 to February 1, 2004.
. The page cited to by FSIC in its L.R. 56.1 statement for the definition of personal and advertising injury, FSIC 01018, includes "[o]ral or written publication of material that violates a person’s right of privacy” within the definition. This section, however, was deleted in its entirety and replaced with the narrower language quoted in the text of this opinion as part of an intellectual property endorsement adopted by FSIC and M & M.
. The fax attached to the first amended complaint indicates that it was sent on June 23, 2005, while the complaint references July 23, 2005. "[Wjhen a written instrument contradicts allegations in the complaint to which it is attached, the exhibit trumps the allegations.” N. Indiana Gun & Outdoor Shows, Inc. v. City of South Bend,
. The complaint further specified that the relevant privacy interest was one of seclusion. Ex. C to Cunningham Aff. ¶ 35.
. In his deposition, Berk, M & M’s president, characterized backyard parties and weddings as “special events.” Ex. D to Cunningham Aff. 31:19-22.
. The TCPA provides for statutory damages of $500 per unsolicited fax or in the amount of the actual monetary loss, whichever is greater. 47 U.S.C. § 227(b)(3)(B). 7,725 faxes were sent on October 29, 2004 and June 23, 2005, which multiplied by $500 equals $3,862,500.
. These figures amount to $150 per fax for faxes # 1-3 and $500 per fax for faxes # 4 and # 5.
. The order also excluded additional insurance policies M & M had for the period of February 1, 2005 to February 1, 2006, including one provided by the James River Insurance Company.
. Hinman and Italia recognize that this court is bound by the Seventh Circuit’s ruling in American States. They do, however, raise the issue in order to preserve it for appeal, citing to an Illinois appellate court decision, Ins. Corp. of Hanover v. Shelborne Assocs.,
. The clause in the policies at issue in this case also refer to “publication of material that violates a person's right of privacy.”
. Although the initial and first amended complaints do not specifically mention invasion of a privacy right, a violation of the right to seclusion is implicit in a TCPA fax blast claim. Valley Forge,
. In fact, the dates on which faxes # 1-3 were sent had been identified in the public record prior to the filing of the second amended complaint. See Eclipse Mfg. Co. v. M & M Rental Ctr., Inc., No. 06-1156, dkt. no. 67 (filed January 18, 2007) (Eclipse reply to its motion for class certification).
. There is no dispute about when the faxes were sent and the amounts that would be allocable to the various insurance policies at issue.
. Maxum and Security argue that they have no duty to indemnify because it is not possible for the underlying plaintiffs — at least those engaged in business — to have suffered an invasion of privacy as a result of the TCPA violation. This -is where the application of Valley Forge is troubling because, while setting aside the scope of privacy law in reading the "invasion of privacy” language of the policy, the Court necessarily concludes that a TCPA violation is an invasion of privacy under the policy. If it were not, it would not invoke a duty to defend. Nonetheless, as long as Valley Forge stands, the duty to indemnify in a case such as this inevitably follows.