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Standard Mutual Insurance Co. v. Lay

Supreme Court of Illinois

May 23, 2013

NORMA LAY, Indiv. and as Ex'r of the Estate of Theodore W. Lay, d/b/a Ted Lay Real Estate Agency, et al., Appellants.

Held [*]

Where the federal Telephone Consumer Protection Act, in prohibiting the sending of unsolicited faxes, provided for liquidated damages of $500 per violation, and a class action resulted in a settlement for $1, 737, 500 plus costs, to be paid solely from insurance, the Act was held to be a remedial statute designed to grant remedies for the protection of rights, with the award being remedial rather than uninsurable as punitive.

Appeal from the Appellate Court for the Fourth District; heard in that court on appeal from the Circuit Court of Macoupin County, the Hon. Patrick J. Londrigan, Judge, presiding.

Michael T. Reagan, of Ottawa, Brian J. Wanca and David Oppenheim, of Appeal Anderson Wanca, of Rolling Meadows, and Phillip A. Bock and Robert M. Hatch, of Bock & Hatch, LLC, of Chicago, appellants.

Robert Marc Chemers and Peter G. Syregelas, of Pretzel & Stouffer, Chrtd., of Chicago, for appellee.

Justices 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.


¶ 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.[1] 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.[2] 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.[3] 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 ...

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