JUSTICE FREEMAN delivered the judgment of the court, with opinion. Chief Justice Kilbride and Justices Thomas, Garman, Karmeier, Burke, and Theis concurred in the judgment and opinion.
¶ 1 Locklear Electric, Inc. (Locklear), brought an action against Ted Lay Real Estate Agency (Lay) pursuant to the Telephone Consumer Protection Act of 1991 (TCPA) (47 U.S.C. § 227(b)(3) (2006)), which resulted in a court-approved settlement. Lay's insurer, Standard Mutual Insurance Company (Standard), filed a complaint for declaratory relief against Lay and Locklear in the circuit court of Macoupin County. Standard sought a determination of Lay's insurance coverage for the underlying lawsuit and settlement. Finding that Lay was not covered, the circuit court granted summary judgment in favor of Standard.
¶ 2 The appellate court affirmed. 2012 IL App (4th) 110527. This court allowed Locklear's petition for leave to appeal. Ill. S.Ct. R. 315 (eff. Feb. 26, 2010). We now affirm the judgment of the appellate court in part and reverse in part, and remand the cause to the appellate court for further proceedings.
¶ 3 I. BACKGROUND
¶ 4 In 2006, Lay was a real estate agency located in Girard, Macoupin County, Illinois. Lay contacted Business to Business Solutions (Business to Business) regarding facsimile message (fax) advertising. Business to Business offered a "blast fax" service, in which it sends fax advertisements to thousands of fax machines cheaply. Business to Business represented to Lay that it had a list of people and entities who wished to receive information by fax. Lay hired Business to Business, and together they created an advertisement for the sale of a car wash, which included Lay's contact information. During June 2006, Business to Business transmitted the advertisement to approximately 5, 000 fax numbers with Illinois area codes 217 and 618. Unbeknownst to Lay, the people and entities on Business to Business' fax list did not consent to receive fax advertisements. On June 13, 2006, Locklear received one of these unsolicited faxes.
¶ 5 A. Underlying Class Action and Settlement
¶ 6 In June 2009, Locklear brought a class action against Lay in the circuit court of Madison County alleging violations of the TCPA.Locklear represented a putative class of 3, 478 people and entities to whom Lay faxed the advertisement. Locklear and the other plaintiffs sought the TCPA-prescribed damages of $500 per violation and injunctive relief (see 47 U.S.C. § 227(b)(3) (2006)).
¶ 7 Lay tendered its defense to its insurer, Standard, which had issued to Lay a commercial general liability insurance policy and a primary businessowners liability insurance policy. In a letter dated July 13, 2009, Standard informed Lay that the insurance policies may not cover the conduct alleged in the class action complaint. For example, according to Standard, the TCPA "may constitute a penal statute, " and the policies excluded coverage for willful violations of penal statutes. Also, according to Standard, the policies excluded coverage for the allegations of the complaint based on the specific language of several policy provisions. For these and several other reasons, Standard agreed to defend Lay in the underlying action subject to a reservation of rights. Standard concluded that a conflict of interest existed for any attorney that Standard would retain to represent Lay. Due to this conflict, Standard advised that Lay could: (1) choose its own defense attorney at Standard's expense; or (2) waive the conflict of interest and Standard's possible coverage defenses, and accept counsel provided by Standard. On that same date, Lay signed a waiver agreeing to accept the attorney hired by Standard, James Mendillo, to defend Lay in the underlying action.
¶ 8 In July 2009, Mendillo removed the underlying action to the United States District Court for the Southern District of Illinois. Lay subsequently retained Edmond H. Rees as its own chosen counsel.In a letter dated October 30, 2009, Rees detailed the conflict of interest between Standard and Lay, and asked Mendillo to withdraw from the case. On December 3, 2009, Lay and Rees signed a proposed settlement of the class action. Rees thereafter informed Mendillo that Lay had decided to dismiss Mendillo and settle the case. Rees subsequently entered his appearance on behalf of Lay. Nevertheless, Mendillo continued to attend all subsequent court hearings. Mendillo recognized Rees as Lay's "personal counsel, " and acknowledged that he was protecting the interests of Standard.
¶ 9 On September 18, 2010, the federal district court entered a final order approving the class certification and settlement. The judgment against Lay was for $1, 737, 500 plus costs. Pursuant to the settlement agreement, Locklear would seek satisfaction of the judgment only from Lay's insurance policies; Locklear would not now or ever execute against Lay's noninsurance assets, even if a determination is made that Lay's insurer did not owe coverage. This provision was expressly referenced and incorporated into the final order. Lay assigned to Locklear all of Lay's claims against, and rights to payment from, Standard.
¶ 10 B. Instant Declaratory Judgment Action
¶ 11 When Lay accepted Standard's representation in the underlying action, subject to Standard's reservation of rights, Standard filed a complaint for declaratory relief against Lay and Locklear in the circuit court of Macoupin County. In July 2010, Standard filed the instant second amended complaint. The eight-count complaint sought a declaration that Standard had no duty to defend or indemnify Lay. Several counts alleged that Lay was not covered pursuant to various specific insurance policy provisions. In count V, Standard alleged that TCPA-prescribed damages of $500 per violation constitute punitive damages, which "are not insurable as a matter of Illinois law and public policy." In counts VI and VII, Standard alleged that it had no duty to indemnify Lay because, inter alia, Lay did not cooperate with Standard, but rather entered into the settlement agreement with Locklear without Standard's consent. In count VIII, Standard sought damages in the amount of the underlying judgment, which Standard characterized as "insurance coverage to which [Lay and Locklear] were not entitled."
¶ 12 In October 2010, Locklear filed an answer and amended counterclaim. Locklear sought a declaration that the insurance policies required Standard to defend and indemnify Lay for its alleged conduct in the underlying action, and that the insurance ...