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Standard Mutual Insurance Co. v. Lay

Court of Appeals of Illinois, Fourth District

January 23, 2014

NORMA LAY, Individually and as Executrix of the Estate of THEODORE W. LAY, d/b/a TED LAY REAL ESTATE AGENCY, Defendant, and LOCKLEAR ELECTRIC, INC., an Illinois Corporation, Defendant-Appellant.

Rule 23 Order filed November 25, 2013

Rule 23 Order withdrawn January 23, 2014

Held [*]

The insurer of the owners of a real estate agency that clearly violated the Telephone Consumer Protection Act by faxing an advertisement about a property listed for sale to recipients that had not agreed to receive the messages was responsible for providing coverage, where the policies issued by the insurer covered the alleged damages, the claim was not excluded by the professional services exclusion in the policies or the exclusion applicable to intentional conduct, sending the faxes violated the recipients’ right to privacy and fell under the “personal and advertising injury” provision, and the insurer gave up the right to object to the insureds’ settlement of the underlying claim when it allowed them to control the defense.

Appeal from the Circuit Court of Macoupin County, No. 09-MR-32; the Hon. Patrick J. Londrigan, Judge, presiding.

Phillip A. Bock, of Bock & Hatch, LLC, of Chicago, Michael T. Reagan, Appeal of Law Office of Michael T. Reagan, of Ottawa, Brian J. Wanca and David M. Oppenheim, both of Anderson & Wanca, of Rolling Meadows, and Paul W. Bloomer, of Denby, Meno, Bloomer & Denby, of Carlinville, for appellant.

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

Panel JUSTICE KNECHT delivered the judgment of the court, with opinion. Justices Pope and Steigmann concurred in the judgment and opinion.



¶ 1 In June 2006, Theodore W. Lay, d/b/a Ted Lay Real Estate Agency (Lay), faxed an advertisement in regard to the sale of a particular property to Locklear Electric, Inc. (Locklear), and others. Because the facsimile message (fax) recipients had not given permission to receive these messages, Lay violated the Telephone Consumer Protection Act of 1991 (Telephone Act) (47 U.S.C. § 227 (2006)). The statute imposes a penalty in the amount of $500 for each fax sent. Lay was sued in a class action with Locklear as the class representative. Defense of the claim was tendered to Standard Mutual Insurance Company (Standard), Lay's insurance carrier, which undertook the defense under a reservation of rights. Standard also filed this declaratory judgment action to determine its coverage under its policies.

¶ 2 The Telephone Act claim against Lay was a potential multimillion dollar claim that would bankrupt the agency if a verdict were entered against it and it was not covered by insurance. Lay opted for independent counsel and then settled with the class action plaintiff for $1, 739, 000 plus costs (the full amount sought in the class action complaint) and assigned its rights against Standard to the class in exchange for a promise by the class not to execute on any of Lay's property or assets other than the insurance policies with Standard.

¶ 3 The settlement was approved by the federal district court and Locklear, the class representative, became actively involved in this declaratory judgment action filed by Standard in Macoupin County. Both Standard and Locklear ultimately filed for summary judgment in the declaratory judgment. After extensive briefing, the trial court denied Locklear's motion and granted that filed by Standard. Locklear appealed this judgment. We affirmed. Standard Mutual Insurance Co. v. Lay, 2012 IL App (4th) 110527, 975 N.E.2d 1099. Our supreme court allowed Locklear's petition for leave to appeal. That court affirmed our judgment in part and reversed in part and remanded the cause to us for further proceedings. Standard Mutual Insurance Co. v. Lay, 2013 IL 114617, 989 N.E.2d 591. We reverse the trial court.


ΒΆ 5 Lay was a small real estate agency located in Girard, Macoupin County, Illinois. Lay hired a fax broadcaster to assist in his advertising effort in selling a property listing. The fax broadcaster (Business 2 Business Services) offered a "blast fax" service to Lay where fax advertisements were sent to thousands of fax machines cheaply. The broadcaster represented to Lay the recipients of the faxes would be only entities that had consented to receiving fax messages such as the one contemplated by Lay. Lay agreed and on June 13, 2006, the faxes were sent by ...

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