The opinion of the court was delivered by: Judge Joan H. Lefkow
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 counter-claim 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.*fn1
With the underlying case concluded, this coverage case became
ripe for decision.
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 did not and that FSIC is entitled to reimbursement of its defense costs from Maxum and Security. Whether Security and Maxum have the duty to indemnify and the extent of that duty remain open issues.
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 "[p]hysical 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, i.e. "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.*fn2 Maxum Policy at M&M322, M&M328.
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").*fn3 The policy contains very similar provisions to that of the Maxum policy, with personal and advertising injury again including injury arising out of an invasion of privacy. The policy does not include an allocation provision similar to that found in the Maxum policy, however.
FSIC issued a commercial insurance policy to M&M covering the period from February 1, 2005 to February 1, 2006. M&M cancelled this policy as of July 1, 2005. Under the policy, FSIC has the duty to defend M&M against any suit seeking damages to which the policy applies, including bodily injury and property damage caused by an occurrence and personal and advertising injury arising out of an offense during the policy period. Property damage and occurrence are defined as in the Maxum and Security policies, and expected or intended injuries are excluded from coverage. Unlike the Maxum and Security policies, personal and advertising injury is defined more narrowly as: 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.*fn4
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.*fn5 This fax offers M&M's services in event planning, such as a "picnic, employee recognition dinner, meeting, trade show or even a 'holiday' party." Ex. B to Cunningham Aff. Eclipse sought to represent the following class:
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 Plaintiff's fax machine from being used for Plaintiff's business purposes during the time [M&M] was using Plaintiff's fax machine for [M&M's] illegal purpose," and "cost Plaintiff employee time, as Plaintiff's employees used their time receiving, routing and reviewing [M&M's] ...