Interpretation of an Insurance Policy when there is a Conflict over which State Law Applies
In G.M. Sign Inc. v. Pennswood Partners Inc., G.M. Sign filed a class action complaint against Pennswood Partners (“Pennswood”) for sending it unsolicited faxes. 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. 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 there was coverage under Illinois law.
G.M. Sign alleges that: (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 parties disagree as to whether there is a conflict between the states regarding whether a duty to defend was triggered in this case. Zurich recognizes that, pursuant to Illinois law, it owed a duty to defend Pennswood. Under Illinois law, the duty to defend was triggered under the property damage provision of the insured’s policy which claims alleged violations of the TCPA. Illinois recognizes a duty to defend a class action complaint asserting violations of the TCPA. However, Zurich argues that under Pennsylvania law, it did not owe a duty to defend because the complaint did not allege “property damage” caused by an occurrence as defined in the policies.
The issue before the court was how to interpret a policy when there is a conflict over which state law applies.
The court determined that Illinois law does not apply because the following was not met. If an insurance policy does not specify a choice of law, the determination is generally governed by the following factors: (1) the location of the subject matter; (2) the place of delivery of the insurance policy; (3) the domicile of the insured or of the insurer; (4) the place of the last act to give rise to a valid insurance policy; and (5) the place of performance, or other place bearing a rational relationship to the general insurance policy.
G.M. Sign, Inc. v. Pennswood Partners, Inc., 2014 IL App (2d) 121276.
