Insurer’s Duty to Defend Insurer for Sending Unsolicited Fax Advertisements

In G.M. Sign, Inc. v. State Farm Fire & Casualty Co., the facts arise out of an underlying fax-blast litigation in which G.M. Sign pursued a class action against Michael Schane (“Schane”) and his company, Academy Engraving Company, for sending unsolicited fax advertisements. On October 1, 2010, G.M. Sign entered into a settlement agreement with Schane. The settlement agreement noted that Schane faxed a total of 49,825 advertisements to the class members without their prior express permission. On November 12, 2010, G.M. Sign sought leave to file an amended complaint, the admitted purpose of which was to plead into possible insurance coverage available under Schane’s insurance policies.

State Farm contended that the trial court erred in finding that it had a duty to defend Schane against the underlying amended complaint because: (1) endorsement within the policy applied to the counts alleging conversion and consumer fraud (the alternative counts); (2) the alternative counts failed to allege property damage caused by an occurrence as those terms are defined in the policy; (3) State Farm’s duty to defend, if any, arose after the case was settled and Schane’s liability was extinguished; and (4) the settlement was unreasonable. G.M. Sign contended that: (1) the trial court erred in limiting the judgment against State Farm to a single occurrence; and (2) the court erred in ruling that State Farm need not indemnify post judgment interest that was actually awarded.

The court reviewed whether State Farm had a duty to defend Schane under G.M. Sign’s amended complaint. The court ruled that G.M. Sign obtained the benefit of its settlement agreement in the underlying litigation by taking the position that Schane sent unsolicited fax advertisements in violation of the TCPA. Therefore the court held that G.M. Sign should not now be permitted to argue that State Farm owed a duty to defend Schane because its amended complaint potentially included faxes that fell outside of the TCPA.

G. M. Sign, Inc. v. State Farm & Casualty Co., 2014 IL App (2D) 130593.