Chicago Business Litigation Lawyer Blog

Workers' compensation insurance is a necessary part of doing business for many companies, so the attorneys at DiTommaso-Lubin are always on the lookout for emerging legal issues in that area. Our Naperville business attorneys recently discovered a decision rendered by the Appellate Court of Illinois that is significant for current and potential clients who have workers' compensation insurance agreements that contain an arbitration clause.

All-American Roofing, Inc. v. Zurich American Insurance Company pits Plaintiff All-American Roofing against its Defendant insurer, Zurich American in a lawsuit that arose from alleged unpaid deductibles and retrospective insurance premiums. The five-year insurance agreement was based upon retrospectively rated premiums that required Plaintiff to reimburse Defendant after the end of a policy year for claims that arose during that year. After the fourth year, the policy exchanged the retrospectively rated premiums for a larger deductible. The dispute began when Defendant summoned Plaintiff to arbitration regarding the aforementioned unpaid sums pursuant to a mandatory arbitration clause contained within the parties' agreement. In response to the arbitration summons, All-American Roofing filed for declaratory judgment along with claims for breach of contract, fraud, and related causes of action. Plaintiff requested that the trial court declare that the mandatory arbitration clause was unenforceable and sought damages for their other claims. The trial court stayed the arbitration, dismissed most of Plaintiffs claims through summary judgment and ordered the parties to arbitrate the remaining issues. Plaintiff then appealed the trial court's rulings regarding the arbitration clause, contract, and fraud claims.

On appeal, Plaintiff argued that the arbitration clause was added to their policy after the first year of coverage and that the clause constituted a material alteration to the policy's coverage. Furthermore, Plaintiff argued that the Illinois Insurance Code required Defendant to give notice that it was not renewing the original coverage. Because Defendant failed to give such notice, the arbitration clause did not legally take effect. The Appellate Court disagreed, stating that the addition of an arbitration clause did not constitute a change in coverage, and cited the plain language of the statute for their reasoning. The Court went on to hold that the agreements and subsequent addenda to it for the first two years were valid because the parties lawfully entered into the agreements and there was sufficient consideration on both sides. The Court also upheld the trial courts granting of Defendant's motion for summary judgment on Plaintiff's fraud claim because there was not sufficient evidence in the record of fraud nor had Plaintiffs identified any material issue regarding Defendant's alleged violation of the Illinois Consumer Fraud and Deceptive Business Practices Act. The Court held that the arbitration clause was not operative for the final two year of the agreement because Plaintiffs never signed the amended policy documents for those years. The Appellate Court reversed the trial court on this issue because they disagreed with the trial court's ruling that Plaintiff's payment and acceptance of coverage signified acceptance of the new terms.

All-American Roofing, Inc. v. Zurich American Insurance Company provides a valuable lesson to business owners who utilize arbitration clauses in their contracts. Namely, this case tells us to read the fine print in any contract before signing it, as you may be getting more (or less, depending on your point of view) than you originally bargained for.

Continue reading "Appellate Court Rules that Adding an Arbitration Clause to an Insurance Agreement Does Not Constitute a Change in Coverage under Illinois Law" »

In a case that presented questions very interesting to our Chicago arbitration and mediation attorneys, the Fourth District Court of Appeal has ruled that standing to arbitrate is not an issue that should itself be submitted to arbitration. In Equistar Chemicals, LP v. Hartford Steam Boiler Inspection and Insurance Company of Connecticut, No. 4-07-0478 (Ill. 4th 2008), Hartford, an insurance company, sought to hold Equistar responsible for damage to a turbine generator owned by Hartford’s insured, Trigen-Cinergy Solutions of Tuscola. Trigen had signed a contract with Equistar that included an arbitration clause, and Hartford filed a demand for arbitration of its claim as a subrogee of Trigen. In court, Equistar moved to stay arbitration until Hartford’s standing to invoke arbitration could be determined. That court denied the stay, saying standing should be determined by arbitrators.

Equistar has an ethanol plant in Tuscola, Ill. It hired Trigen to provide energy, water and wastewater treatment at the plant, and their contract included an arbitration agreement. Later, an Equistar employee allegedly acted negligently with a circuit breaker, causing an electrical arc that damaged a turbine generator belonging to Trigen. Hartford, as the insurer to Trigen, paid $853,442 to repair the damage, then filed a demand for arbitration with the American Arbitration Association. It requested the $853,442 in damages from Equistar, by virtue of its subrogee relationship with Trigen. Equistar responded by objecting in Illinois trial court to Hartford’s standing, the jurisdiction of arbitrators and the arbitrability of the claim. It later filed a motion to stay arbitration until, among other things, standing could be determined. The trial court denied that motion, concluding that Hartford had standing as a subrogee, but that standing can be determined in arbitration.

Equistar filed this interlocutory appeal, arguing that the Illinois Uniform Arbitration Act requires the court, not private arbitrators, to decide questions of standing. It quoted at length from the Act: “...if the opposing party denies the existence of the agreement to arbitrate, the court shall proceed summarily to the determination of the issue so raised[.] ... On application, the court may stay an arbitration proceeding commenced or threatened on a showing that there is no agreement to arbitrate. That issue, when in substantial and bona fide dispute, shall be forthwith and summarily tried and the stay ordered if found for the moving party.” Under this language, the Fourth said it’s clear that the Act requires courts to make the initial determination of whether parties have agreed to arbitrate. In this case, it added, there was no reason to delay things by sending the question to arbitration, since arbitrators would have no special skill in determining whether Hartford had standing to invoke arbitration.

In determining otherwise, the trial court had relied on language in the parties’ arbitration agreement saying “the decision of the arbitrators (including the decision that the dispute is arbitrable) shall be final and binding upon the parties[.]” The trial court had written that this language leads logically to the conclusion that arbitrators make determinations of arbitrability and the courts shall have no role. The Fourth disagreed, writing instead that this language only clarifies how much authority arbitrators should have; it does not expand their authority. Parties are free to give arbitrators that authority, the court wrote, but they can and should explicitly say so.

The Fourth next looked at the issue of Hartford’s standing as a subrogee -- an issue of first impression in Illinois. Equistar argued that Hartford, as Trigen’s subrogee, cannot compel arbitration because it was not a party to the arbitration agreement. Their agreement did not explicitly include subrogees, assignees or other third parties, and in fact explicitly said the parties did not have the right to incur obligations to third parties on behalf of the other, or commit the other party to a contract. Hartford countered that its right to arbitration comes through subrogation law, not the contract, making this language irrelevant. Illinois caselaw in Ervin v. Nokia, Inc., 349 Ill. App. 3d 508, 512, 812 N.E.2d 534, 539 (2004) defines contract-based theories that can bind a nonsignatory to an arbitration agreement, but subrogation is not among them. Two cases from other states have come to different conclusions on the issue, the court noted. And Illinois subrogation law puts the subrogee (in this case, Hartford) directly into the shoes of the subroger (Trigen).

Ultimately, the Fourth decided that Hartford should have the same rights and obligations as Trigen. That means Hartford does not merely have a right to arbitrate, the court wrote -- it is required to do so under Trigen’s contract. Thus, it upheld the trial court’s decision to deny the motion to stay arbitration. This meant affirming the decision as a whole, even though it noted that it disagreed with the trial court that arbitrators should determine standing.

Continue reading "Fourth District Rules Standing to Sue Is Not an Arbitrable Issue, but Denies Stay of Arbitration" »

Our Illinois insurance bad faith attorneys were pleased to see a recent decision from the Fifth District Court of Appeals that upheld a driver’s right to fair treatment from her auto insurance company. American Family Mutual Insurance Company v. Stagg, Ill. 5th No. 5-08-0088 (Aug. 10, 2009) Diane Stagg had an insurance policy with American Family that included uninsured and underinsured motorist coverage. That part of the policy had a provision stating that the parties could demand arbitration if they couldn’t agree on the existence or amount of coverage. It also said that arbitration awards would be binding and could be entered as judgments in court if they did not exceed the minimum limits set by the Illinois Safety Responsibility Law. If they did exceed that limit, either party has the right to a trial. The limit for bodily injury at the time was $20,000.

Stagg was later hit by an at-fault driver with a very small amount of insurance. She collected the $25,000 available in liability insurance from the at-fault driver, but requested more under her uninsured motorist coverage. She and American Family went to arbitration and she was awarded $36,340.75. However, the arbitrators set off $25,000 for the at-fault driver’s payment and $5,000 in expenses American Family had paid, leaving her with an award of just $6,340.75. Four months later, American Family filed a complaint to enforce that judgment, saying Stagg hadn’t objected to the award within time limits set by the Illinois Uniform Arbitration Act. The next month, Stagg filed a separate action against American Family, seeking a new trial.

The parallel claims may have caused some conflicting decisions by the court, but it eventually clarified that it intended to grant Stagg’s motion to dismiss American Family’s complaint. American Family appealed, arguing that the arbitration award was $6,340.75, too low to meet the contract’s threshold for going to court. Stagg argued that the arbitration award was actually 36,340.75, making it larger than the minimum limit cited in the contract. In its analysis, the court found that the term “arbitration award” as used in the contract was subject to more than one interpretation. Under American States Insurance Co. v. Koloms, 177 Ill. 2d 473, 479 (1997), the court said, ambiguous language in an insurance policy should be construed against the drafter. Thus, Stagg is entitled to a new trial under the contract.

The court then addressed American Family’s contention that Stagg missed the deadline to appeal the arbitration award under the Uniform Arbitration Act. The Fifth agreed with Stagg, who argued that the limitation didn’t apply because she isn’t challenging the award through the Act, but instead requesting a new trial. The arbitration award was never binding under the contract’s language, the court said, meaning that Stagg had no obligation to state any grounds for overturning it. Thus, the court’s decision to dismiss American Family’s complaint was upheld.

Continue reading "Fifth District Allows New Trial for Insurance Customer Unhappy With Arbitration Award" »

In an unusual Illinois insurance fraud lawsuit, the First District Court of Appeal has ruled that two insureds are entitled to attorney fees, sanctions and other relief under section 155 of the Illinois Insurance Code. Siwek v. White, No. 1-07-2600 (Ill. 1st Feb. 27, 2009) pits drivers Christine Siweck and Jerrold Erickson against their former auto insurer, which the court found improperly canceled their insurance policy.

Siwek was in an auto accident while using Erickson’s vehicle in the summer of 2003. Erickson was insured by American Access Casualty Company, with Siweck on the policy as a co-operator. They notified the state of Illinois of the accident and named American as their insurer, but American told the state in September of that year that the policy had been canceled in May of that year. This led IDOT to certify both Siweck and Erickson as drivers who had been involved in an accident without auto insurance. At a hearing, Erickson successfully defended his license. Siweck testified at the same hearing that she had no notice of cancellation and presented paperwork showing that American had issued her a new declaration of coverage on the day after the supposed cancellation.

The state suspended Siweck’s driver’s license nonetheless. Siweck and Erickson sued for administrative review of the decision to suspend Siweck’s license and declaratory judgments against American. They sought a declaration that their policy was improperly canceled, meaning Siweck was insured at the time of the accident.

In response, American argued in court papers that the policy was canceled for failure to pay. Erickson bought the insurance policy through a broker and financed it through Fullerton Finance Company, which would make an up-front payment to American and accept monthly payments from Erickson. Fullerton notified American in May of 2003 that plaintiffs had failed to pay, so American canceled the policy. Because the premium had not been paid, American argued, it had no duty to insure Siweck. However, the plaintiffs responded, Fullerton had made the payment, they had no notice of the cancellation and Fullerton was not authorized to cancel the policy. Furthermore, American had issued them a declaration of coverage on the very next day after the purported cancellation.

The trial court ultimately dismissed American’s defenses with prejudice and granted summary judgment to the plaintiffs. After a settlement offer from American, the plaintiffs also dismissed their claims against the state of Illinois. They then moved for attorney fees, costs and sanctions under section 155 of the Insurance Code, which provides those payments when an insurer has been “vexatious and unreasonable.” These were granted. American appealed that decision along with the summary judgment and dismissal of its affirmative defenses.

The First District started by considering American’s appeals of the summary judgment for plaintiffs and the dismissal of its own alternative defenses. Regardless of the merits of those arguments, the court wrote, they were waived on appeal because American did not fight them at trial. It did not oppose plaintiffs’ motion for summary judgment, the court wrote, and in fact expressly said it would not in its settlement letter. However, if the court did consider those arguments, it asserted that would still affirm the trial court’s ruling. American had not effectively countered the plaintiffs’ claims about the declaration of coverage issued the day after its purported cancellation of their policy, the court wrote.

Finally, the court considered American’s appeal of the order for attorney fees and sanctions. American argued that the motion was not timely, that it had never denied liability coverage since no claim was filed and that plaintiffs had not paid the premium. Again, the appeals court disagreed. The relevant section of the Illinois Insurance Code states that a court may award attorney fees and sanctions when it believes an insurer’s delays were vexatious and unreasonable. One factor that tests this is whether the insured was forced to sue to recover, the court wrote -- as was the case here. Thus, it declined to find that the trial court abused its discretion in the matter and affirmed the court’s decision as to attorney fees and sanctions as well.

Based in Chicago and Oakbrook Terrace, Ill., the law firm of DiTommaso-Lubin handles consumer rights and consumer fraud litigation throughout the Midwest and the United States. Our Illinois, DuPage County and Chicago insurance fraud lawyers and consumer attorneys represent clients whose insurance companies refuse to pay claims or provide coverage to which the clients are contractually entitled. If that sounds like your situation, you may be able to recover the premium, attorney fees and other damages in a Chicago insurance bad faith lawsuit. To learn more at a free consultation with DiTommaso-Lubin, please contact us as soon as possible.

A private security company's agreement with a competitor does not foreclose insurance coverage in lawsuits filed against the first company alone, the First District Court of Appeal has ruled. Clarendon America Insurance Company v. B.G.K. Security Services, Inc., No. 1-07-2994 (Ill. 1st Dec. 19, 2008), arises out of a 2003 fire at a Cook County-owned building at 69 West Washington Street in Chicago. Twenty-two lawsuits resulted from the fire. Clarendon, which insures BGK, had filed for declaratory judgment that it had no duty to defend BGK in those suits.

Clarendon's argument focuses on language in its policy, specifying that the insured parties include "[a]ny organization you newly acquire or form, other than a partnership, joint venture or limited liability company..." It used that language to argue that coverage for BGK in the 22 fire lawsuits should be excluded, because BGK had entered into a joint venture with another security company, Aargus Security Systems, Inc. Both sides filed for summary judgment in the trial court, and the trial court sided with BGK. Clarendon appealed, arguing both the summary judgment language and that it should have been allowed to complete discovery because the record was unclear.

By contrast, BGK argued that Clarendon has a duty to defend because the lawsuits name BGK rather than the joint venture, and BGK is also the insured named by the insurance policy. The appeals court agreed. Pointing out that the joint venture is extrinsic evidence, the court reasoned that this evidence involves facts that could drastically change the underlying litigation (the fire lawsuits) by affecting BGK's liability. That would make it an impermissible consideration under Illinois caselaw, the court wrote, and thus, the trial court was right to exclude it.

In any case, the court added, the provision in question is ambiguous. Clarendon pointed to language saying that "no person or organization is an insured with respect to the conduct of any current or past... joint venture... that is not shown as a Named Insured..." Again, the court said, the Named Insured and the named defendant in the suits at issue are both BGK, and no suits named the joint venture. And because it had already concluded that considering extrinsic evidence is inappropriate at the declaratory judgment stage, the court also rejected Clarendon's argument that it should have been allowed to proceed with discovery to clarify BGK's status as a joint venture. It affirmed the trial court's decision on all counts.

The Chicago business and commercial law trial attorneys at DiTommaso-Lubin have substantial experience unraveling the complexities of insurance coverage disputes and other breach of contract litigation. From our offices in Chicago and Oak Brook, Illinois, we represent businesses and individuals with business-related disputes in Illinois as well as Indiana and Wisconsin. If you need to protect yourself and your business in legal proceedings and you’d like to learn more about how we can help, you can contact us to set up a confidential consultation.

In a proposed class-action insurance fraud lawsuit, the Illinois Third District Court of Appeal has ruled that a chiropractor may not sue a workers’ compensation insurer. In Martis v. Grinnell Mutual Reinsurance Company, No. 3-08-0004 (Ill. 3rd March 27, 2009), chiropractor Richard Martis sued Grinnell Mutual Reinsurance Company after Grinnell’s billing employees incorrectly paid Martis too little for treating an injured worker.

In February of 2006, Martis began treating an employee of Water Management Corp. of Illinois who had been injured on the job. He was to be paid by Water Management’s workers’ compensation policy, issued by Grinnell. When he submitted his bills to Grinnell, the insurer’s outside billing firm applied PPO discounts to those bills even though Martis did not have a PPO agreement with Grinnell. Thus, Grinnell underpaid Martis. He responded with a proposed class-action lawsuit encompassing all Illinois health care providers who had been underpaid by Grinnell in the same way, through incorrect PPO discounts.

The complaint by Martis alleged conspiracy, unjust enrichment, breach of contract and violations of the Illinois Consumer Fraud Act. The trial court granted Grinnell’s motion to dismiss the conspiracy and unjust enrichment counts. However, it certified the class of health-care providers as to the breach of contract claim. Grinnell appealed the denial of its motion to dismiss the breach of contract claim and the class certification to the Third District.

The appeals court reversed those decisions. In its opinion, the court said Martis is not a party to the contract between Grinnell and Water Management. Nor is he a third-party beneficiary to the contract, the court said -- the employee Martis treated is such a person, but Martis himself is not. Because this is an issue of first impression in Illinois, the court cited cases from states including Hawaii, Mississippi, Indiana and Texas in which state courts held that medical providers are not intended third-party beneficiaries. It also pointed to decisions in other states holding that medical providers are only incidental beneficiaries of auto insurance policies. And in federal cases, they wrote, courts have found that medical providers are intended beneficiaries only when the insurance policy requires direct payment to the medical provider.

From this, the court concluded that medical providers like Martis are third-party beneficiaries of workers’ compensation insurance policies only when the insurance policy specifically says so. It found that the policy did not, despite a clause saying Grinnell is liable to “any person entitled to benefits payable by this insurance.” The language does not identify third parties, the court wrote, and medical providers are not among those entitled to benefits under the Illinois Workers’ Compensation Act. Thus, Martis cannot enforce the contract and has no breach of contract claim. For the same reasons, the court next found, it was inappropriate of the trial court to certify a class action of other providers who are also not parties to the Grinnell contract. Thus, it reversed and remanded the trial court’s decisions.

Justice Mary McDade dissented from the ruling. She concurred that Martis is not a third-party beneficiary, as the majority found, but disagreed with its choice to reverse certification of a class action. Class actions must be based on a valid cause of action, she wrote -- but the analysis the majority used to decide whether there is a valid cause of action for breach of contract was wrong. McDade wrote that the issue is not whether Martis is a valid third-party beneficiary to the contract, but whether there was a breach of contract against Martis. And because Grinnell failed to pay Martis for services rendered, there was. The plaintiff’s breach of contract complaint does not rely on being a third-party beneficiary to Grinnell’s contract. Thus, McDade wrote, she would affirm.

The national consumer rights and class action law firm of DiTommaso-Lubin with offices in Chicago and Oak Brook, IL handles all types of consumer fraud and class-action litigation, including Illinois insurance bad faith lawsuits. If you have made an insurance claim, but the company refuses to pay some or all of the benefits it owes you under its own contract, you may be a victim of insurance bad faith. Our Chicago consumer rights and class action lawyers can help. To learn more about how you can protect your rights at a free consultation, please contact us through the Internet or call toll-free at 1-877-990-4990.

New York Attorney General Andrew Cuomo entered into a 50 million dollar settlement with health insurance carriers for alleged deceptive setting of "usual, customary and reasonable and rates" for out of net work health care providers through use of a conflicted rating agency owned by an insurance company. A news story on the settlement is below:

Our private law firm is investigating alleged deceptive use by health insurance companies of bogus low ball out of net work rates to avoid paying for needed health care and is considering filing consumer fraud class actions on behalf of victims of this practice.

Class action lawsuits our firm has been involved in or spear-headed have led to substantial awards totalling over a million dollars to organizations including the National Association of Consumer Advocates, the National Consumer Law Center, and local law school consumer programs. DiTommaso-Lubin is proud of our achievements in assisting national and local consumer rights organizations obtain the funds needed to ensure that consumers are protected and informed of their rights. By standing up to consumer fraud and consumer rip-offs, and in the right case filing consumer protection lawsuits and class-actions you too can help ensure that other consumers' rights are protected from corporate misdeeds.

Our Naperville, Waukegan, Aurora, Wheaton, Oak Brook, and Chicago consumer attorneys provide assistance in consumer fraud and consumer rights cases including in Illinois and throughout the country. You can click here to see a description of the some of the many individual and class-action consumer cases we have handled. A video of our lawsuit which helped ensure more fan friendly security at Wrigley Field can be found here. You can contact one of our Chicago area consumer lawyers here who can assist in health insurance fraud, unfair debt collection, junk fax and other consumer, consumer fraud or consumer class action cases by filling out the contact form at the side of this blog or by clicking here.

As business litigators and class action defense attorneys in Illinois, we recently noted an appellate decision on the subject favorable to the defense. An insurance policy that excludes coverage for "professional services" does not cover damages in a junk fax class action, the Second District Court of Appeal has decided. Westport Insurance Corporation v. Jackson National Life Insurance Company, No. 2-07-1205 (Ill. 2nd Dec. 19, 2008).

Stonecrafters, Inc. is the lead plaintiff in a class-action lawsuit over unsolicited faxes sent by Handleman Insurance Agency, Inc. Handleman sells health insurance policies as an agent for Jackson National Life Insurance Company. Jackson, in turn, has liability insurance from Westport Insurance Corporation. After Stonecrafters settled its suit with Handleman, Handleman assigned its insurance rights to the class, including its insurance from Westport (through Jackson). Westport then filed for a declaratory judgment that these damages are not covered by its contract. The contract covers losses "for damages... arising out of the conduct of the business of the insured agent in rendering services for others as a licensed... health insurance agent."

Westport argued that the faxes -- which advertised group health insurance -- did not constitute business activities of an insurance agent. The trial court agreed and granted summary judgment in its favor. Stonecrafters appealed, saying the advertisement was a service to clients and should therefore be covered. The Second District disagreed. It used an analogy to a Texas case, Atlantic Lloyd's Insurance Co. of Texas v. Susman Godfrey, L.L.P., 982 S.W.2d 472 (Tex. App. 1998), in which the insurer disputed coverage for a law firm that had allegedly defamed a doctor in its advertising. The Texas court found that the letter did not constitute "professional services" as used in the firm's insurance policy because no legal advice or services were provided.

Similarly, the court wrote, Handleman did not provide any professional services as an insurance broker in its faxes. It pointed out that the professional services of an insurance agent are specialized knowledge of the insurance market and how it applies to the customer. By contrast, the fax was a general advertisement that specifically said actual premiums vary from group to group. "The mere offer to perform a professional service is not a professional service in its own right," the court wrote, and thus it affirmed the trial court's summary judgment ruling.

DiTommaso-Lubin's business litigation attorneys handle class action defense for businesses as well as general Illinois contract disputes, including insurance coverage disputes. With offices in Chicago and its outskirts, near Oak Brook, Wheaton and Naperville, Ill., we represent clients in Illinois, Indiana, Wisconsin and throughout the United States. If you need help protecting your legal rights in a business dispute and would like to learn more about our services, please contact us today for a confidential consultation.

Over at the Illinois Appellate Lawyer Blog, our colleague Steven R. Merican recently called our attention to an appeals court decision related to insurance coverage for “junk fax” class actions -- an important practice for our firm. Eclipse Manufacturing v. United States Compliance, Nos. 2-06-0825, 2-06-0889 (11/30/07).

In the underlying case, Eclipse Manufacturing Co. filed a class-action lawsuit against United States Compliance for sending Eclipse unsolicited “blast faxes” in violation of the federal Telephone Consumer Protection Act and the Illinois Consumer Fraud and Deceptive Practices Act. Compliance’s insurer, Hartford Casualty Insurance Co., declined to cover the defense. Compliance later settled with Eclipse by simply assigning its right to the full limits of its coverage under the policy. In order to collect this settlement, Eclipse then filed a third-party citation against Hartford.

In part because Hartford hadn’t sought a declaratory judgment on its obligation to defend Compliance, estopping it from raising policy defenses, the trial court sided with Eclipse. Hartford later filed for declaratory judgment in Minnesota, where Compliance is based, but its claim was dismissed for lack of jurisdiction. Hartford appealed, arguing that it was not estopped because the trial court should have applied Minnesota law, which it argued conflicts with Illinois law on estoppel. Furthermore, Hartford argued, its policy doesn’t cover the underlying lawsuit under either state’s law. The Illinois Second District Court of Appeal affirmed the trial court, saying there was no conflict in outcomes between Illinois and Minnesota laws of estoppel. Thus, Hartford was estopped from raising policy arguments -- making them irrelevant.

As Merican points out, the appeals court also addressed its jurisdiction -- important because Hartford’s “protective” notice of appeal might have been dismissed for lack of jurisdiction until recently. It was filed before a recent change in Illinois Supreme Court Rule 303(a)(1), which previously said a party must file its notice of appeal within 30 days of a final judgment. When Hartford filed its appeal, there had been no final judgment -- merely a notice from the trial court that it intended to rule for Eclipse. That would mean the appeal should be dismissed for lack of jurisdiction.

While the appeal was pending, however, Rule 303(a)(1) was changed to address this situation, treating appeals like Hartford’s as if they were filed on the date of the final judgment, making it a legitimate appeal. Because the appeals court had recently ruled in In Re Marriage of Duggan No. 2--06--0061, (October 16, 2007) that a similar rule change applied retroactively to pending appeals, it allowed Hartford’s appeal “[i]n the interest of consistency.” Nonetheless, the appeals court eventually ruled against Hartford.

Our firm has sucessfully certified class actions involving junk faxes and obtained substantial class wide settlements from the defendants and their insurance carriers. If you want to contact one of our Chicago consumer attorneys to pursue a junk fax case click here.

In an insurance contract dispute, the Seventh U.S. Circuit Court of Appeals ruled April 23 that a liability insurer has no duty to defend a village from litigation alleging intentional misconduct, but not negligence. St. Paul Fire and Marine Insurance Company v. Village of Franklin Park, No. 06-2924 (7th Cir. 4/23/2008) is a contract dispute between an insurer and an Illinois township accused in separate litigation of severely underfunding its mandatory firefighters’ pension fund.

Under Illinois state law, municipalities must establish and administer pension funds for their firefighters. Firefighters in Franklin Park sued under that law, alleging that the village had intentionally underfunded their pension fund for more than 30 years. After the suit was filed in state court in January of 2002, the village asked its liability insurer, St. Paul, to defend it under a policy that covered disputes over employee benefits plans. The insurer declined, and the village disputed this, but did not sue. In late 2004, St. Paul filed in federal court, seeking a declaratory judgment that it had no duty to defend the village. In March of 2006, the district court granted that judgment, ruling that St. Paul’s contract created a duty to defend against negligence, not the intentional wrongdoing alleged by the firefighters. The village appealed both the judgment and the denial of a motion to reconsider. The Seventh Circuit affirmed.

In its opinion, the three-judge panel agreed with St. Paul that the firefighters’ allegations were not a “loss” under the meaning of the policy, pointing to caselaw that distinguishes between loss and money that was illegally or unethically withheld from its rightful owner.

Even if the outcome of the firefighters’ suit required the Village to move amounts earmarked for other uses or collect more taxes, the Village would not suffer a “loss” under the policy because it would still only be paying an amount offset by a benefit it had already received—either having the use of extra tax money or having the ability to collect fewer taxes. See Level 3, 272 F.3d at 911. Were the rule otherwise, Franklin Park could avoid its pension fund obligations entirely by levying no taxes and making no contributions. It would be absurd to think that in such a situation, the effect of a court finally requiring the Village to make the contributions would be a covered “loss” that St. Paul was required to cover.

The Illinois Supreme Court handed a victory to plaintiffs throughout Illinois with its 2006 ruling in an insurance dispute over whether insurers must cover the costs of a junk fax class action lawsuit for an insured covered for an “advertising injury.” In Valley Forge Insurance Co. v. Swiderski Electronics, Inc., 2006 Ill. LEXIS 1655, the state Supreme Court ruled that business insurers have a duty to defend “junk fax” class action lawsuits.

The underlying dispute in the Illinois Supreme Court case started when private investigator Ernie Rizzo filed a proposed class action lawsuit against Swiderski Electronics for sending him “junk faxes.” Unsolicited advertisements sent via fax violate both the federal Telephone Consumer Protection Act and the Illinois Consumer Fraud and Deceptive Business Practices Act. Swiderski had an insurance policy from Valley Forge Insurance Company, which insured Swiderski against a personal or advertising injury that arises out of “Oral or written publication, in any manner, of material that violates a person’s right of privacy[.]” The insurer claimed that because the faxes had not revealed Rizzo’s own personal information, they did not invade his privacy and thus were not covered. They also claimed that sending information via fax does not constitute publication.

The insurer asked a trial court for a declaratory judgment stating it was not obligated to cover Swiderski; all parties filed cross-motions seeking summary judgment. The trial court ruled in favor of Swiderski, as did the appellate court and, eventually, the Illinois Supreme Court. That court rejected Valley Forge’s arguments, rejecting the claim that faxing is not “publication,” using the plain meaning of the word. It also ruled that privacy under the federal TCPA and caselaw includes the right to be left alone:

The receipt of an unsolicited fax advertisement implicates a person’s right of privacy insofar as it violates a person’s seclusion, and such a violation is one of the injuries that a TCPA faxad claim is intended to vindicate.

That contradicts the a 2004 decision by the Seventh U.S. Circuit Court of Appeals in American States Insurance Co. v. Capital Associates of Jackson County Inc., 392 F.3d 939, which found no duty to defend under very similar circumstances. The Seventh Circuit’s earlier ruling said privacy rights may include the right to seclusion in some cases, but “advertising injury” clauses do not, so insurers have no duty to defend in junk fax cases. Because the Seventh is bound by Illinois Supreme Court precedent in cases involving Illinois law, the more recent ruling overturns American States, handing a victory to plaintiffs and businesses who are plagued by unwanted junk faxes.