Court of Appeals of Illinois, First District, Third Division
BRIDGEVIEW HEALTH CARE CENTER, LTD., Individually and on Behalf of a Class of Similarly Situated Persons, Plaintiff-Appellee,
STATE FARM FIRE and CASUALTY COMPANY, Defendant-Appellant (Jerry Clark, d/b/a Affordable Digital Hearing, Defendant).
Appeal from the Circuit Court of Cook County 10 CH 28169 Honorable Rita M. Novak, Judge Presiding.
Justices Sterba and Hyman concurred in the judgment and opinion.
JUSTICE NEVILLE PRESIDING
¶ 1 Bridgeview Health Care Center filed a complaint against Jerry Clark for sending it unsolicited faxes. Bridgeview then filed a declaratory judgment action against Clark's insurer, State Farm Fire and Casualty Company, seeking a declaration that State Farm had a duty to defend and indemnify Clark in the underlying lawsuit for the unsolicited faxes. Bridgeview filed a motion for summary judgment in the declaratory judgment action, relying on decisions of the Illinois courts to show that State Farm had a duty to defend Clark. State Farm filed a motion for summary judgment claiming that Indiana law applied and that decisions of the federal court sitting in Indiana established that State Farm had no duty to defend. The trial court found that the federal decisions did not prove a conflict between Indiana law and Illinois law, so Illinois law applied. Under Illinois law, State Farm had a duty to defend Clark. The trial court granted summary judgment in favor of Bridgeview.
¶ 2 In this appeal, we find that in the absence of controlling authority from Indiana's state courts on the question at issue in a case, this court should conduct a conflict analysis. We reverse the trial court's judgment and remand for the trial court to determine which state has the most significant contacts with the dispute, and for the application of that state's law to the dispute.
¶ 3 BACKGROUND
¶ 4 Jerry Clark, an Illinois resident, ran his own unincorporated business in Terre Haute, Indiana, selling and repairing hearing aids. In September 2005, Clark purchased comprehensive business liability insurance from State Farm, to cover his business activities in Indiana. Clark bought the policy through an insurance agency located in Terre Haute, Indiana, and State Farm's offices in West Lafayette, Indiana, issued the policy in exchange for a check Clark drew on his account in an Indiana bank.
¶ 5 In 2009, Bridgeview filed the underlying lawsuit against Clark in the United States District Court for the Northern District of Illinois, alleging that in 2006, Clark faxed an unsolicited advertisement to Bridgeview's business offices in Chicago. In the first count of the complaint, Bridgeview claimed that Clark violated the Telephone Consumer Protection Act (TCPA) (47 U.S.C. § 227 (2000)). The second count charged Clark with conversion of Bridgeview's toner, paper and employee time, and the third count charged Clark with violating the Illinois Consumer Fraud and Deceptive Business Practices Act (815 ILCS 505/2 (West 2006)).
¶ 6 Clark tendered defense of the lawsuit to State Farm. State Farm accepted the defense subject to a reservation of the right to deny coverage, and it paid Clark's independent counsel's fees to fulfill its possible responsibility to provide a defense.
¶ 7 On June 30, 2010, Bridgeview filed a lawsuit against State Farm and Clark, seeking a judgment declaring that State Farm had a duty to defend and indemnify Clark in the underlying lawsuit, because the unwanted faxes caused both advertising injury and property damage within the meaning of State Farm's policy. State Farm filed a counterclaim against Bridgeview and Clark, seeking a judgment declaring that it had no duty to defend or indemnify Clark in the underlying lawsuit.
¶ 8 Both Bridgeview and State Farm filed motions for summary judgment. Bridgeview presented an affidavit from Clark, who said that in 2006, Business to Business Solutions (BBS), which operated out of New York, persuaded Clark to hire BBS to help market Clark's business. BBS told Clark it would fax ads to about 100 businesses located within 20 miles of Terre Haute. Clark did not authorize BBS to fax ads to Bridgeview or any other businesses or individuals in Chicago. BBS did not inform Clark when it sent the advertisements, and BBS did not tell Clark where it sent the advertisements. According to his affidavit, Clark did not conduct any of his hearing aid business in Illinois, and he did not solicit clients from Illinois.
¶ 9 State Farm admitted that it has its principal place of business in Illinois. However, State Farm argued that Indiana law should apply to the coverage dispute because Indiana had the most significant contacts with the dispute. Bridgeview answered that Illinois had more significant contacts and that Indiana law did not differ from Illinois law on the question of whether State Farm had a duty to defend and indemnify Clark in the underlying lawsuit.
¶10 The trial court found that the decision in Pekin Insurance Co. v. XData Solutions, Inc., 2011 IL App (1st) 102769, governed the declaratory judgment action here. In Pekin, Targin, an Illinois corporation, sued XData, an Indiana corporation, for faxing ads to Targin in violation of the TCPA. Targin also sued for conversion of its paper and toner used in the fax machine. XData tendered defense of the lawsuit to its insurer, Pekin, which promptly sued for a judgment declaring that, under Indiana law, it had no duty to defend XData.
¶ 11 The parties agreed that no published decision of the Indiana state courts had addressed the issue of whether a commercial liability policy covered claims for violations of the TCPA as either advertising injury or property damage. Pekin relied on two decisions of federal courts sitting in Indiana. The district courts that decided Ace Mortgage Funding, Inc. v. Travelers Indemnity Co. of America, 2008 U.S. Dist. LEXIS 18696 (S.D. Ind. Mar. 10, 2008), and Erie Insurance Exchange v. Kevin T. Watts, Inc., No. 1:05-CV-163 DFH-TAB, No. 1:05-CV-867-JDT-TAB, 2006 U.S. Dist. LEXIS 35828 (S.D. Ind. May 30, 2006), predicted that Indiana courts would hold that the commercial liability ...