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The Cincinnati Insurance Company v. Arnold Chapman and

June 29, 2012

THE CINCINNATI INSURANCE COMPANY,
PLAINTIFF-APPELLEE,
v.
ARNOLD CHAPMAN AND C.T. PHOENIX OF INDIANA, INC.,
DEFENDANTS-APPELLANTS.



Appeal from the Circuit Court of Cook County, Chancery Division. No. 10 CH 10888 The Honorable Peter Flynn,

Judge Presiding. JUSTICE HARRIS delivered the judgment of the court, with opinion. Justices Cunningham and Connors concurred in the judgment and opinion.

OPINION

¶ 1 In March of 2010, plaintiff, the Cincinnati Insurance Company (CIC), filed a complaint for declaratory relief against defendants, C.T. Phoenix of Indiana, Inc. (Phoenix), and Arnold Chapman, seeking a judgment declaring that CIC was not obligated to defend and indemnify Phoenix in its underlying lawsuit with Chapman. Chapman had previously filed the underlying suit against Phoenix alleging Phoenix violated the Telephone Consumer Protection Act of 1991 (TCPA) (47 U.S.C. § 227(2006)) and the Illinois Consumer Fraud and Deceptive Business Practices Act (815 ILCS 505/2 (West 2008)), and committed common law conversion. CIC, which had issued a commercial general liability policy to Phoenix, denied Phoenix's demand to defend and indemnify it based on a TCPA exclusion clause in the policy. CIC and Chapman participated in two status hearings in the case at bar. At the second status hearing, the circuit court judge mentioned to the parties that he had recently ruled on a similar issue in another pending case which involved Chapman's counsel. In the other pending action, the circuit court judge ruled against the party that Chapman's counsel represented. The day after the second status hearing, Chapman filed a motion for substitution of judge as a matter of right pursuant to section 2-1001(a)(2) of the Illinois Code of Civil Procedure (Code). 735 ILCS 5/2-1001(a)(2) (West 2010). The circuit court certified the following question pursuant to Illinois Supreme Court Rule 308 (eff. Feb. 26, 2010):

"Case A and Case B involve different parties but share a common substantive issue. Defendants' counsel in Case B also represents parties in Case A. Both cases are pending before the same judge. The judge decides the common issue in Case A in a manner directly adverse to the Case B defendants' position. So far, however, there has been no ruling in Case B. The Case B defendants then move for a 735 ILCS 5/2-1001(a)(2) substitution of judge as a matter of right. Is the judge required to grant the motion?"

¶ 2JURISDICTION

¶ 3 The circuit court certified the question now before this court on June 14, 2011. Chapman filed a petition for leave to appeal on June 27, 2011, which this court granted on August 1, 2011. Accordingly, this court has jurisdiction pursuant to Rule 308 governing certified questions. Ill. S. Ct. R. 308 (eff. Feb. 26, 2010).

¶ 4 BACKGROUND

¶ 5 On March 17, 2010, CIC filed its complaint for declaratory relief against Chapman and Phoenix. In its complaint, CIC alleged that it issued a commercial general liability policy to Phoenix. In August of 2008, Chapman filed the underlying suit against Phoenix, alleging Phoenix had telefaxed an advertisement to Chapman in violation of the TCPA (47 U.S.C. § 227) and the Illinois Consumer Fraud and Deceptive Business Practices Act (815 ILCS 505/2 (West 2008)). Chapman also alleged common law conversion. Phoenix made a demand to CIC that it defend and indemnify it in the underlying suit under the commercial general liability policy. CIC denied coverage based on an exclusion in its policy with Phoenix. In August of 2009, Chapman and Phoenix settled. In October of 2009, Chapman, as a judgment creditor, issued a third-party citation to discover assets to CIC. CIC asked that a declaratory judgment be entered declaring that CIC was not obligated to provide coverage for the underlying suit or any judgment that had been entered against Phoenix.

¶ 6 A case management hearing, which would have been the parties' first appearance before the circuit court, was set for September 10, 2010. However, Chapman and CIC presented an agreed motion to reset the case management hearing date to September 21, 2010. In the agreed motion, Chapman and CIC stated that both defendants had accepted service, but had not filed an answer. The motion further stated Chapman planned to file an answer, but that "[CIC] has been advised that [Phoenix] plans to default and not appear or answer." On August 16, 2010, the circuit court granted the agreed motion and entered an order resetting the case management hearing date for September 21, 2010.

¶ 7 On September 21, 2010, the circuit court entered an order setting the matter for a status hearing on December 7, 2010.

¶ 8 On December 7, 2010, another status hearing was held. We note that the record does not contain a transcript from the December 7, 2010, hearing.

¶ 9 On December 8, 2010, Chapman filed a motion for substitution of judge as a matter of right pursuant to section 2-1001(a)(2) of the Code. 735 ILCS 5/2-1001(a)(2) (West 2010). Chapman alleged that all of the requirements for the substitution of judge as a matter of right had been satisfied. Specifically, he had not previously moved or received a substitution of judge in the case and that the circuit court had "not ruled on any issues in the case."

¶ 10 In response, CIC argued Chapman's motion was not timely filed. CIC alleged that the parties had appeared before the court on two occasions: on September 21, 2010, and December 7, 2010. At the September 21, 2010, hearing, CIC alleged that when the court asked the parties whether cross-motions for summary judgment would be filed, the parties responded that they wanted to complete discovery. According to CIC's response, Chapman's counsel at the September 21, 2010, hearing also "referenced" a ruling by another circuit court judge in a similar case. CIC alleged the following occurred at the September 21, 2010, hearing:

"Counsel for [Chapman] referenced a recent ruling by Judge Agran (Acuity Ins. v. Blackhawk Paving, No. 08 CH 35830) which held that a similar TCPA exclusion was inapplicable to the common law conversion count included in the TCPA complaint, and argued that since a similar common law conversion count was included in the underlying complaint against Phoenix, that [CIC] was obligated to afford coverage for the judgment against Phoenix."

A status hearing was set for December 7, 2010. At the December 7, 2010, status hearing, the court again inquired whether the parties were prepared to file cross-motions for summary judgment; the parties again indicated that they would like to complete outstanding discovery. CIC alleged ...


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