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Sharp v. Trans Union L.L.C.

January 25, 2006


Appeal from the Circuit Court of Cook County. No. 01 CH 05697 Honorable Philip L. Bronstein, Judge Presiding.

The opinion of the court was delivered by: Justice Theis


Defendant, Trans Union LLC, appeals pursuant to Supreme Court Rule 304(b)(5) (Official Reports Advance Sheet No. 22 (October 26, 2005), R. 304(b)(5), eff. January 1, 2006) from a contempt order entered by the circuit court of Cook County after Trans Union failed to comply with an earlier order compelling it to produce certain documents requested by plaintiff, Alec Sharp, individually and as representative of certain underwriters at Lloyd=s of London (the Underwriters). In that request, pursuant to Supreme Court Rule 214 (166 Ill. 2d R. 214), the Underwriters sought documents relevant to their determination of whether certain class action lawsuits filed against Trans Union would be excluded from coverage under Trans Union=s $75 million professional liability insurance policy. Those documents included, inter alia, items reflecting or pertaining to Trans Union=s general counsel=s knowledge of the Fair Credit Reporting Act (15 U.S.C. * 1681 et seq. (West 2006)) (the FCRA) and of Federal Trade Commission (FTC) and private litigation arising from alleged violations of the FCRA (collectively the pre-policy documents). Trans Union refused to turn the pre-policy documents over to the Underwriters, claiming they were protected from disclosure by the attorney-client privilege and the work product doctrine. The circuit court granted the Underwriters= motion to compel the production of the pre-policy documents and, when Trans Union refused to comply, held Trans Union in contempt of court.

On appeal, Trans Union contends that the circuit court erred in granting the Underwriters= motion to compel Trans Union to produce the pre-policy documents. Trans Union alternatively argues that even if production of the pre-policy documents was properly ordered, it should not occur at this time because it will prejudice Trans Union=s defense in the underlying lawsuits. For the reasons that follow, we find that Trans Union bargained away any privilege against disclosure applicable to the pre-policy documents when it agreed to a manuscripted insurance policy, which defined coverage in terms of what Trans Union=s general counsel knew about existing and potential errors and omissions lawsuits.

The record discloses the following facts relevant to the determination of this appeal. Trans Union is an international provider of consumer credit reporting services. As such, Trans Union collects and maintains a massive database of consumer credit information. In the 1990's, Trans Union was engaged in the business of selling prescreened lists of consumers to credit grantors for target marketing purposes.

On December 15, 1992, the FTC filed an administrative complaint against Trans Union, alleging that Trans Union violated the FCRA by selling consumer reports in the form of prescreened lists to third parties for improper purposes. An administrative law judge ultimately ruled that Trans Union violated the FCRA by selling the lists. However, Trans Union elected to appeal the FTC=s decision and continued to sell the target marketing information. At the time the present action was filed, Trans Union was still pursuing appeals of the FTC=s decision. Trans Union did not stop selling consumer information from its databases until roughly 2002.

On August 31, 1998, Joshua Frey filed a complaint against Trans Union in Orange County, California, based on allegations similar to those in the FTC complaint. The plaintiff alleged, inter alia, that Trans Union Asells the individual consumer information it collects * * * to third-parties who do not have a permissible purpose for obtaining or receiving the information * * * under the FCRA.*

During this time, Trans Union decided to procure professional liability insurance coverage. Denise Norgle, Trans Union=s assistant general counsel at the time, explained in her deposition that she was involved in the discussions leading to the decision. However, the only factor that Norgle could recall in the decision was that Trans Union had been involved in contract negotiations with some Avery large customers,* who would have required Trans Union to obtain errors and omissions insurance. Norgle would not answer questions regarding whether Trans Union suspected that there would be future lawsuits based on the sale of consumer information to third parties without proper purposes under the FCRA. Norgle would also not answer questions about whether Trans Union believed that such future suits would be covered under a professional liability insurance policy.

Accordingly, on October 13, 1998, Trans Union submitted an application for professional liability insurance with its broker, Aon Risk Services, Inc. In that application, Trans Union indicated that there were Avarious consumer claims pending against it that have been brought for alleged violations of federal and state consumer reporting laws.* However, the FTC and Frey lawsuits were not listed among the suits disclosed at that time.

Through Aon, negotiations to insure Trans Union began with the Alec Sharp Syndicate at Lloyd=s of London. Andrew Syson, the Sharp Syndicate=s commercial professional indemnity underwriter at the time, further explained this process in his deposition. Although Syson was not familiar with Trans Union=s application, he explained generally that someone at the Sharp Syndicate would have reviewed the application and the claims history before underwriting the policy. Frequently, underwriters request more information on pending claims.

Terms of policies are then established by negotiation. The wording of the policy might begin with a more standard language, but would be altered during the negotiation process. Regarding the policy at issue in the case at bar, Syson identified a number of changes that were made to the language of the policy during the negotiation process. Among them, the language of exclusion (g) of the policy was changed from excluding:

Aany Claim arising out of acts, errors, violations or omissions that took place prior to the effective date of this Insurance, if the Chief Financial Officer of the Named Assured on the effective date knew or could reasonably have foreseen that such acts, errors, violations or omissions might be expected to be the basis of a Claim* (emphasis added)

to excluding claims only if the chief financial officer on the effective date Aknew that such acts, errors, violations or omissions might be expected to be the basis of a Claim.* (Emphasis added.)

Stuart Essex, Aon=s United Kingdom broker, also discussed the negotiation of the policy language in his deposition. Essex stated that he had never worked on an account that required so many changes to the policy language, observing that this was Aone of the worst cases I have seen for required amendments.* Essex also indicated that Aon was concerned they were Akilling the policy with too many attempts to amend the policy language.*

The process of negotiating Trans Union=s policy took months, and Aon wanted the coverage in place by June 10, 1999. Accordingly, on April 9, 1999, Essex sent an e-mail to Mary Gander at Aon expressing his concerns that an agreement regarding the policy might not be reached. Essex also requested a Ano known loss* letter, which would indicate that since Trans Union submitted its application, no further known claims had been filed. According to Syson, it was ...

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