MESA LABORATORIES, INC., Plаintiff-Appellant, v. FEDERAL INSURANCE COMPANY, Defendant-Appellee.
No. 20-1983
United States Court of Appeals For the Seventh Circuit
ARGUED NOVEMBER 10, 2020 - DECIDED APRIL 20, 2021
Before EASTERBROOK, KANNE, and SCUDDER, Circuit Judges.
Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 19-cv-2340 - John Z. Lee, Judge.
The question in this case is straightforward: When an insurance policy provides that the insurer has no duty to defend its insured against any claim “arising out of” the TCPA, does that exclusion extend to common-law claims arising from the TCPA-violating conduct?
The district court said yes, and we agree. We therefore affirm the district
I. BACKGROUND
Mesa Laboratories, Inc., a Colorado corporation, sent faxes promoting its dental-industry-related services. But some (if not all) of the recipients had not consented to receive such faxes, and the faxed materials did not include an opt-out notice as required by the TCPA.
In 2018, James L. Orrington, II, a Chicago-area dentist, filed a class-action lawsuit against Mesa in federal court for sending unsolicited fax advertisemеnts in violation of the TCPA and the Illinois Consumer Fraud and Deceptive Business Practices Act (“ICFA“),
During the litigation, Mesa notified its insurer, Federal Insurance Company, of the Orrington action and asked Fedеral to defend it. Federal declined to provide a defense because it contended that the suit fell outside of the policy‘s coverage.
After Mesa and Orrington reached a settlement agreement, Mesa filed this suit against Federal, alleging breach of cоntract, bad faith, and improper delay and denial of claims under Colorado Revised Statute sections 10-3-1115 and 10-3-1116. Federal moved for judgment on the pleadings.
In January 2020, the district court granted Federal‘s motion. It concluded that two of the policy‘s exclusions applied tо bar Mesa‘s claim. As explained below, we need only consider one of the exclusions to decide this case—the “Information Laws Exclusion.” It provides that the policy “does not apply to any damages, loss, cost or expense arising out of any actual or alleged or threatened violation of ... the United States of America Telephone Consumer Protection Act (TCPA) of 1991 ... or any similar rеgulatory or statutory law in any other jurisdiction.” The district court concluded that this exclusion barred all of the claims because the common-law claims arose out of the same conduct underlying the statutory claims.
Mesa filed a motion to vacate the judgment and for lеave to file an amended complaint, which the court denied. Mesa now appeals.
II. ANALYSIS
As stated in Landmark American Insurance Co. v. Hilger, we review a district court‘s grant of a motion for judgment on the pleadings de novo, applying the same standard as a
“A federal court exercising its diversity jurisdiction over state-law claims applies the choice-of-law rules of the state in which it sits.” Gunn v. Cont‘l Cas. Co., 968 F.3d 802, 808 (7th Cir. 2020) (citing Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487 (1941)). Here, the district court sits in Illinois.
Before the court is required to make a choice-of-law determination, the moving party must establish that “there is
Although the parties dispute whether Colorado or Illinois law appliеs, Mesa points to no true conflict between the laws of those states regarding the interpretation of the Information Laws Exclusion. Indeed, Mesa acknowledged in its opening brief that there is no Colorado case law on point. Therefore, we, like the district cоurt sitting in Illinois, look to Illinois law.
In Illinois, “[a]n insurer has a duty to defend its insured ‘unless it is clear from the face of the underlying complaint that the facts allеged do not potentially fall within the policy‘s coverage.‘” Zurich Am. Ins. Co. v. Ocwen Fin. Corp., 990 F.3d 1073, 1078 (7th Cir. 2021) (quoting G.M. Sign, Inc. v. State Farm Fire & Cas. Co., 18 N.E.3d 70, 77 (Ill. App. Ct. 2014)). One way for an insured‘s claim to fall outside of a policy‘s coverаge is for it to fall within an exclusion. See id. But if even one claim is covered, then the insurer has a duty to defend the entire suit. Health Care Indus. Liab. Ins. Program v. Momence Meadows Nursing Ctr., Inc., 566 F.3d 689, 694 (7th Cir. 2009). Moreover, “a dеcision to excuse an insurer‘s duty to defend based on an exclusionary clause in the contract ‘must be clear and free from doubt.‘” Zurich, 990 F.3d at 1078 (quoting Evergreen Real Est. Servs., LLC v. Hanover Ins. Co., 142 N.E.3d 880, 887 (Ill. App. Ct. 2019)).
Tо make this determination, we compare the factual allegations in the underlying complaint to the relevant policy provisions. Health Care, 566 F.3d at 694 (citing Outboard Marine Corp. v. Liberty Mut. Ins., 607 N.E.2d 1204, 1212 (Ill. 1992)).
The Information Laws Exclusion provides that the policy “does not apply to any damages, loss, cost or expense arising out оf any actual or alleged or threatened violation of ... the United States of America Telephone Consumer Protection Aсt (TCPA) of 1991 ... or any similar regulatory or statutory law in any other jurisdiction.”
Orrington‘s complaint asserted claims against Mesa under the TCPA, the ICFA, and commоn law. And the alleged conduct underlying each claim was the same: Mesa sent unsolicited fax advertisements to Orrington‘s office. The parties agree that the exclusion covers Orrington‘s statutory claims, but they diverge on its application to the common-law claims.
The answer is now clear under our recent decision in Zurich—the “arising out of” language subjects the common-law claims to the exclusion, as well. Zurich, 990 F.3d at 1078-79.
In Zurich, we considered a similar policy exclusion for property damage “resulting from or arising out of any actual or alleged violation of ... the [TCPA].” Id. at 1076. We concluded that “[t]he ‘arising out of’ language excludes the underlying conduct that forms the basis of the violation of an enumerated law, even if liability for that underlying conduct might exist under a lеgal theory that is not expressly mentioned in the policy exclusion (e.g., common-law invasion of privacy).” Id. 1079.
III. CONCLUSION
We thus AFFIRM.