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G.M. Sign, Inc. v. State Farm Fire & Cas. Co.

Court of Appeals of Illinois, Second District

May 2, 2014

G.M. SIGN, INC., Individually and as the Representative of a Certified Class, Plaintiff and Counterdefendant-Appellee and Cross-Appellant,
STATE FARM FIRE AND CASUALTY COMPANY, Defendant and Counterplaintiff-Appellant and Cross-Appellee

Modified Upon Denial of Rehearing September 2, 2014.

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Appeal from the Circuit Court of Lake County. No. 11-MR-315. Honorable Diane E. Winter and David M. Hall, Judges, Presiding.


In an underlying blast-fax action where plaintiff settled its claim by agreeing to satisfy the judgment it obtained against the underlying defendant, who violated the Telephone Consumer Protection Act, from the insurance policy issued by the defendant insurer in the instant declaratory judgment action, the trial court erred in entering summary judgment for plaintiff, since the policy's specific exclusion of claims under the Act applied to the claims for conversion and consumer fraud in plaintiff's amended complaint, especially when plaintiff would be unable to prove defendant in the underlying action was liable on the conversion and consumer fraud claims without also proving a violation of the Act, and plaintiff's attempt to recharacterize the class action it had already litigated and settled in order to obtain insurance coverage could not be condoned.

Michael C. Borders and Rosa M. Tumialan, both of Dykema Gossett PLLC, of Chicago, for appellant.

Brian J. Wanca, David M. Oppenheim, and Jeffrey A. Berman, all of Anderson & Wanca, of Rolling Meadows, and Phillip A. Bock and Robert M. Hatch, both of Bock & Hatch, LLC, of Chicago, for appellee.

JUSTICE ZENOFF delivered the judgment of the court, with opinion. Justices Jorgensen and Birkett concurred in the judgment and opinion.


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[¶1] This is a declaratory judgment action involving a dispute over insurance coverage for a blast-fax case. The question is whether defendant State Farm Fire and Casualty Company's policy exclusion (hereinafter Endorsement FE-6655) applied to the amended complaint in the underlying litigation. If Endorsement FE-6655 applied, then State Farm's duty to defend was never triggered. The circuit

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court of Lake County ruled that State Farm had a duty to defend and to indemnify. After modifying our opinion upon denial of plaintiff G.M. Sign, Inc.'s petition for rehearing, we reverse and remand with directions to enter judgment in State Farm's favor.


[¶3] The facts pertinent to this appeal are taken from the present record and from this court's opinion in G.M. Sign, Inc. v. Schane, 2013 IL App (2d) 120434, 985 N.E.2d 685, 368 Ill.Dec. 878. The appeal in Schane arose out of the underlying blast-fax litigation, in which G.M. Sign pursued a class action against Michael Schane and his company, Academy Engraving Company, for sending unsolicited fax advertisements. Because Academy was dismissed from the underlying suit, we refer only to Schane when discussing the underlying litigation.

[¶4] A. The Underlying Litigation (No. 10-CH-4480)

[¶5] On August 12, 2010, G.M. Sign, individually and as the representative of a class of similarly situated persons, filed suit against Schane. The complaint began: " This case challenges [Schane's] practice of faxing unsolicited advertisements." The complaint's preliminary allegations further alleged that G.M. Sign was seeking " an award of statutory damages for each violation of the [Telephone Consumer Protection Act of 1991 (TCPA) (47 U.S.C. § 227 et seq. (2000))]." The TCPA makes it unlawful to fax an unsolicited advertisement unless the sender has an established business relationship with the recipient, the recipient consents to such a communication, and the advertisement contains an opt-out notice. 47 U.S.C. § 227(b)(1)(C) (2000).

[¶6] The complaint contained three counts: count I alleged a violation of the TCPA; count II alleged conversion; and count III alleged violations of the Illinois Consumer Fraud and Deceptive Business Practices Act (Act) (815 ILCS 505/1 et seq. (West 2010)). Each count incorporated the same factual allegations: on or about September 6, 2007, Schane faxed to G.M. Sign an advertisement, which was attached to the complaint as " Exhibit A" ; G.M. Sign had not given Schane permission to fax advertisements to it; and Schane faxed " the same or similar advertisements" to G.M. Sign and more than 39 other recipients without first receiving their express permission. All three counts incorporated allegations that the unsolicited fax advertisements violated the TCPA.

[¶7] Count I of the complaint proposed the following class:

" All persons who (1) on or after four years prior to the filing of this action, (2) were sent telephone facsimile messages of material advertising the commercial availability of any property, goods, or services by or on behalf of [Schane], (3) with respect to whom [Schane] did not have prior express permission or invitation for the sending of such faxes, and (4) with whom [Schane] did not have an established business relationship."

The classes proposed in counts II and III were essentially the same except for the time periods referenced.[1] The class for count II was composed of all persons who received faxes on or after a date five years prior to the filing of the action, while the class for count III was composed of all persons who received faxes on or after a date three years prior to the filing of the

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action. As in count I, the classes in counts II and III consisted of persons who received advertisements, who had not given Schane permission to send them, and who did not have established business relationships with Schane.

[¶8] Schane tendered the suit to State Farm, his business insurer. On September 10, 2010, State Farm, by letters to Schane and to G.M. Sign's attorney, denied coverage based on Endorsement FE-6655:


The following exclusion is added to BUSINESS LIABILITY EXCLUSIONS:

This insurance does not ...

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