G.M. Sign, Inc. v. Pennswood Partners, Inc.

Decision Date24 March 2014
Docket NumberNo. 2–12–1276.,2–12–1276.
Citation2014 IL App (2d) 121276,9 N.E.3d 49,380 Ill.Dec. 799
PartiesG.M. SIGN, INC., Plaintiff and Defendant and Counterplaintiff–Appellee, v. PENNSWOOD PARTNERS, INC., Defendant–Appellee and Cross–Appellant (Maryland Casualty Company and Assurance Company of America, Plaintiffs and Counterdefendants–Appellants and Cross–Appellees).
CourtUnited States Appellate Court of Illinois


Michael M. Marick, Karen M. Dixon, and Timothy H. Wright, all of Meckler Bulger Tilson Marick & Pearson LLP, of Chicago, for appellants.

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

Micheal C. Borders and Rosa M. Tumialan, both of Dykema Gossett PLLC, of Chicago, for amici curiae.


Justice McLAREN delivered the judgment of the court, with opinion.

¶ 1 G.M. Sign filed a class action complaint against Pennswood Partners (Pennswood), for sending it unsolicited faxes. Maryland Casualty Company (Maryland Casualty) and Assurance Company of America (Assurance) then filed a declaratory judgment action against Pennswood and G.M. Sign, seeking a declaration that their insurance policies did not provide coverage to Pennswood in the underlying lawsuit for the unsolicited faxes. Maryland Casualty and Assurance (collectively, Zurich) are underwriting insurance companies that issued insurance policies to Pennswood. Zurich filed a motion for summary judgment, arguing that there was no coverage under Pennsylvania law as predicted by federal courts in Pennsylvania. Pennswood and G.M. Sign argued that Illinois law applied and that under Illinois law there was coverage. The trial court initially granted summary judgment in favor of Zurich and against Pennswood and G.M. Sign. However, upon Pennswood and G.M. Sign's motion to reconsider, the trial court withdrew its order and ultimately determined that the federal decisions did not establish a conflict between Pennsylvania law and Illinois law; therefore, Illinois law applied; and, under Illinois law, Zurich had a duty to defend Pennswood. Thus, the trial court granted summary judgment in favor of Pennswood and G.M. Sign. The trial court subsequently denied Pennswood and G.M. Sign's request for accrued postsettlement interest.

¶ 2 Zurich appeals the trial court's summary judgment in favor of Pennswood and G.M. Sign and against Zurich, arguing: (1) Illinois courts are vested with the discretion to consider federal courts' predictions in their conflict-of-laws analysis; (2) in an insurance coverage case, a single state's law should be applied to the interpretation of an insurance policy; and (3) Zurich had no duty to defend or indemnify Pennswood in the underlying action under Pennsylvania law.1

¶ 3 Pennswood and G.M. Sign appeal the trial court's denial of their request for accrued postsettlement interest. We reverse in part and affirm in part.


¶ 5 Pennswood, a Pennsylvania corporation with its principal and only place of business located in Wyomissing, Pennsylvania, provided executive placement services. Maryland Casualty is a Maryland corporation engaged in the insurance business, with its principal place of business in Illinois. Assurance is a New York corporation engaged in the insurance business, with its principal place of business also in Illinois. G.M. Sign is an Illinois corporation with its principal place of business located in Round Lake, Illinois.

¶ 6 On March 20, 2007, G.M. Sign filed a class action complaint 2 against Pennswood, alleging the following. Pennswood “transmitted by telephone facsimile machine unsolicited advertisements to [G.M. Sign's] facsimile machine.” Pennswood “sent thousands of similar unsolicited facsimile advertisements to at least 39 other recipients.” Pennswood “knew or should have known that” it did not have the recipients' permission or invitation to send them advertising. The complaint alleged that on two occasions in 2006 Pennswood faxed unsolicited advertisements to G.M. Sign. The three-count complaint alleged the following: (1) Pennswood violated the Telephone Consumer Protection Act of 1991 (TCPA) ( 47 U.S.C. § 227 (2006)), “by transmitting [the advertisements] to [G.M. Sign] and the other members of the class” and that Pennswood's “actions caused damages to [G.M. Sign] and the other class members, because their receipt of [Pennswood's] unsolicited fax advertisements caused them to lose paper and toner consumed as a result” and “cost [them] employee time”; (2) Pennswood was liable for common-law conversion of the plaintiffs' “fax machine toner, paper, memory, and employee time”; and (3) Pennswood violated the Illinois Consumer Fraud and Deceptive Business Practices Act ( 815 ILCS 505/2 (West 2006)). The complaint alleged that a class action was proper in that “the class consists of forty or more persons in Illinois and throughout the United States and is so numerous that joinder of all members is impracticable.” The complaint alleged that members of the class received faxed unsolicited advertisements from Pennswood within three, four, and five years from the filing of the complaint. The complaint sought damages, an injunction, attorney fees, and the certification of the class.

¶ 7 On May 22, 2007, Pennswood tendered its defense to Zurich. In a letter dated July 23, 2007, Zurich denied Pennswood's tender of defense, disclaiming any obligation to defend or indemnify in the underlying class action.

¶ 8 On July 31, 2007, the parties to the underlying class action filed a motion in the trial court for approval of terms of a settlement agreement signed by the parties on July 27 and July 30, 2007. The settlement agreement provided that Pennswood agreed to allow entry of a judgment against it in the amount of $8 million that would be enforceable only “against the proceeds of” the Zurich policies. In addition, Pennswood agreed to assign to the class its rights under the Zurich policies.

¶ 9 On October 30, 2007, following a fairness hearing, the trial court in the underlying class action granted Pennswood and G.M. Sign's motion for approval of the settlement agreement and entered judgment in favor of the class and against Pennswood in the amount of $8 million, “to be satisfied only from the proceeds of [Pennswood's four Zurich] insurance policies.” The trial court also ordered G.M. Sign's attorney to receive 33.33% of any recovery from Zurich, in accordance with the agreement. The trial court found the provisions of the agreement to be fair and reasonable. The trial court found that Pennswood faxed in excess of 80,000 unsolicited advertisements to the class between March 20, 2003, and December 1, 2003; faxed in excess of 160,000 unsolicited advertisements to the class between December 1, 2003, and December 1, 2004; faxed in excess of 160,000 unsolicited advertisements to the class between December 1, 2004, and December 1, 2005; and faxed in excess of 160,000 unsolicited advertisements to the class between December 1, 2005, and December 1, 2006. The trial court ordered that postsettlement interest would accrue from the date of the entry of the order. The trial court stated that its order was a “final and appealable order.”

¶ 10 Zurich issued four commercial general liability policies to Pennswood (the Zurich policies) that were in effect during the relevant time period of the allegations contained in G.M. Sign's class action complaint. The policies were negotiated, delivered, and received in Pennsylvania. The premiums for the policies were paid by Pennswood from Pennsylvania.

¶ 11 Under “Coverage A,” the Zurich policies provide coverage for “bodily injury” and “property damage” caused by an “occurrence.” The policies define “occurrence” as an “accident, including continuous or repeated exposure to substantially the same general harmful conditions.” The policies define “property damage” as:

“a. Physical injury to tangible property, including all resulting loss of use of that property. All such loss of use shall be deemed to occur at the time of the physical injury that caused it; or

b. Loss of use of tangible property that is not physically injured. All such loss shall be deemed to occur at the time of the ‘occurrence’ that caused it[.]

The policies contain the following exclusion:

“Expected Or Intended Injury:

‘Bodily Injury’ or ‘property damage’ expected or intended from the standpoint of the insured.”

Under “Coverage B,” the policies provide coverage for “personal and advertising injury” liability.

¶ 12 The policy in effect December 1, 2005, through December 1, 2006, also incorporates an endorsement applicable to “Coverage A,” entitled “Violation Of Communication Or Law Exclusion,” that provides:

“This insurance does not apply to:

Violation of Communication or Information of Law

‘Bodily injury,’ ‘property damage’ or ‘personal and advertising injury’ resulting from or arising out of any actual or alleged violation of:

A. The Federal Telephone Consumer Protection Act (47 U.S.C. § 227),* * *

B. Any other federal, state or local statute, regulation or ordinance that imposes liability for the:

(1) Unlawful use of telephone, electronic mail, internet, computer, facsimile machine or other communication or transmission device; or

(2) Unlawful use, collection, dissemination, disclosure or reclosure of personal information in any manner by any insured or on behalf of any insured.”

Each Zurich policy at issue includes the following endorsement:


This endorsement modifies insurance provided under the following:


COVERAGE B (Section I) does not apply and none of the references to it in the Coverage Part apply.”

Each Zurich policy at issue contains the following condition:

“2. Duties In The Event Of Occurrence, Offense, Claim Or Suit

* * *

c. You and any other involved insured must:

* * *

(3) Cooperate with us in the...

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    ...section 2–1402 proceeding was subject to de novo review). Moreover, we review a choice-of-law issue de novo. G.M. Sign, Inc. v. Pennswood Partners, Inc., 2014 IL App (2d) 121276, ¶ 25, 380 Ill.Dec. 799, 9 N.E.3d 49.¶ 16 B. Collateral Estoppel¶ 17 Plaintiffs submit three reasons why the fede......
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