                           ILLINOIS OFFICIAL REPORTS
                                        Appellate Court




           Bridgeview Health Care Center, Ltd. v. State Farm Fire & Casualty Co.,
                                2013 IL App (1st) 121920




Appellate Court            BRIDGEVIEW HEALTH CARE CENTER, LTD., Individually and on
Caption                    Behalf of a Class of Similarly Situated Persons, Plaintiff-Appellee, v.
                           STATE FARM FIRE and CASUALTY COMPANY, Defendant-
                           Appellant (Jerry Clark, d/b/a Affordable Digital Hearing, Defendant).



District & No.             First District, Third Division
                           Docket No. 1-12-1920


Filed                      June 19, 2013


Held                       The appellate court reversed the entry of summary judgment for plaintiff
(Note: This syllabus       in an action seeking a declaratory judgment that defendant insurer was
constitutes no part of     obligated under the commercial liability policy it issued to defend and
the opinion of the court   indemnify the insured, an Indiana business, in the underlying suit alleging
but has been prepared      that the insured sent unsolicited faxes to plaintiff, since a potential
by the Reporter of         conflict existed between Illinois and Indiana law as to whether the policy
Decisions for the          provided the coverage at issue, and the cause was remanded for a
convenience of the         determination of whether Illinois or Indiana law governed the
reader.)
                           controversy.


Decision Under             Appeal from the Circuit Court of Cook County, No. 10-CH-28169; the
Review                     Hon. Rita M. Novak, Judge, presiding.



Judgment                   Reversed and remanded.
Counsel on                 Dykema Gossett, PLLC, of Chicago (Michael C. Borders and Rosa
Appeal                     Tumialan, of counsel), for appellant.

                           Anderson & Wanca, of Rolling Meadows (Brian J. Wanca and David M.
                           Oppenheim, of counsel), and Bock & Hatch, LLC (Phillip A. Bock, of
                           counsel), and Gardner Koch & Weisberg (Vincent A. Lavieri, of counsel),
                           both of Chicago, for appellee.

                           Meckler Bulger Tilson Marick & Pearson, of Chicago (Michael M.
                           Marick, Karen M. Dixon, and Timothy H. Wright, of counsel), for amicus
                           curiae.


Panel                      PRESIDING JUSTICE NEVILLE delivered the judgment of the court,
                           with opinion.
                           Justices Sterba and Hyman concurred in the judgment and opinion.



                                             OPINION

¶1          Bridgeview Health Care Center filed a complaint against Jerry Clark for sending it
        unsolicited faxes. Bridgeview then filed a declaratory judgment action against Clark’s
        insurer, State Farm Fire and Casualty Company, seeking a declaration that State Farm had
        a duty to defend and indemnify Clark in the underlying lawsuit for the unsolicited faxes.
        Bridgeview filed a motion for summary judgment in the declaratory judgment action, relying
        on decisions of the Illinois courts to show that State Farm had a duty to defend Clark. State
        Farm filed a motion for summary judgment claiming that Indiana law applied and that
        decisions of the federal court sitting in Indiana established that State Farm had no duty to
        defend. The trial court found that the federal decisions did not prove a conflict between
        Indiana law and Illinois law, so Illinois law applied. Under Illinois law, State Farm had a
        duty to defend Clark. The trial court granted summary judgment in favor of Bridgeview.
¶2          In this appeal, we find that in the absence of controlling authority from Indiana’s state
        courts on the question at issue in a case, this court should conduct a conflict analysis. We
        reverse the trial court’s judgment and remand for the trial court to determine which state has
        the most significant contacts with the dispute, and for the application of that state’s law to
        the dispute.

¶3                                        BACKGROUND
¶4          Jerry Clark, an Illinois resident, ran his own unincorporated business in Terre Haute,
        Indiana, selling and repairing hearing aids. In September 2005, Clark purchased

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       comprehensive business liability insurance from State Farm, to cover his business activities
       in Indiana. Clark bought the policy through an insurance agency located in Terre Haute,
       Indiana, and State Farm’s offices in West Lafayette, Indiana, issued the policy in exchange
       for a check Clark drew on his account in an Indiana bank.
¶5          In 2009, Bridgeview filed the underlying lawsuit against Clark in the United States
       District Court for the Northern District of Illinois, alleging that in 2006, Clark faxed an
       unsolicited advertisement to Bridgeview’s business offices in Chicago. In the first count of
       the complaint, Bridgeview claimed that Clark violated the Telephone Consumer Protection
       Act of 1991 (TCPA) (47 U.S.C. § 227 (2000)). The second count charged Clark with
       conversion of Bridgeview’s toner, paper and employee time, and the third count charged
       Clark with violating the Illinois Consumer Fraud and Deceptive Business Practices Act (815
       ILCS 505/2 (West 2006)).
¶6          Clark tendered defense of the lawsuit to State Farm. State Farm accepted the defense
       subject to a reservation of the right to deny coverage, and it paid Clark’s independent
       counsel’s fees to fulfill its possible responsibility to provide a defense.
¶7          On June 30, 2010, Bridgeview filed a lawsuit against State Farm and Clark, seeking a
       judgment declaring that State Farm had a duty to defend and indemnify Clark in the
       underlying lawsuit, because the unwanted faxes caused both advertising injury and property
       damage within the meaning of State Farm’s policy. State Farm filed a counterclaim against
       Bridgeview and Clark, seeking a judgment declaring that it had no duty to defend or
       indemnify Clark in the underlying lawsuit.
¶8          Both Bridgeview and State Farm filed motions for summary judgment. Bridgeview
       presented an affidavit from Clark, who said that in 2006, Business to Business Solutions
       (BBS), which operated out of New York, persuaded Clark to hire BBS to help market Clark’s
       business. BBS told Clark it would fax ads to about 100 businesses located within 20 miles
       of Terre Haute. Clark did not authorize BBS to fax ads to Bridgeview or any other businesses
       or individuals in Chicago. BBS did not inform Clark when it sent the advertisements, and
       BBS did not tell Clark where it sent the advertisements. According to his affidavit, Clark did
       not conduct any of his hearing aid business in Illinois, and he did not solicit clients from
       Illinois.
¶9          State Farm admitted that it has its principal place of business in Illinois. However, State
       Farm argued that Indiana law should apply to the coverage dispute because Indiana had the
       most significant contacts with the dispute. Bridgeview answered that Illinois had more
       significant contacts and that Indiana law did not differ from Illinois law on the question of
       whether State Farm had a duty to defend and indemnify Clark in the underlying lawsuit.
¶ 10        The trial court found that the decision in Pekin Insurance Co. v. XData Solutions, Inc.,
       2011 IL App (1st) 102769, governed the declaratory judgment action here. In Pekin, Targin,
       an Illinois corporation, sued XData, an Indiana corporation, for faxing ads to Targin in
       violation of the TCPA. Targin also sued for conversion of its paper and toner used in the fax
       machine. XData tendered defense of the lawsuit to its insurer, Pekin, which promptly sued
       for a judgment declaring that, under Indiana law, it had no duty to defend XData.
¶ 11        The parties agreed that no published decision of the Indiana state courts had addressed

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       the issue of whether a commercial liability policy covered claims for violations of the TCPA
       as either advertising injury or property damage. Pekin relied on two decisions of federal
       courts sitting in Indiana. The district courts that decided Ace Mortgage Funding, Inc. v.
       Travelers Indemnity Co. of America, No. 1:05-cv-1631-DFH-TAB, 2008 U.S. Dist. LEXIS
       18696 (S.D. Ind. Mar. 10, 2008), and Erie Insurance Exchange v. Kevin T. Watts, Inc., No.
       1:05-cv-867-JDT-TAB, 2006 U.S. Dist. LEXIS 35828 (S.D. Ind. May 30, 2006), predicted
       that Indiana courts would hold that the commercial liability policies at issue in those cases
       did not provide coverage for charges that the insureds violated the TCPA or that they caused
       property damage to the recipients of unwelcome faxes.
¶ 12       The Pekin court held:
           “[W]e agree with the circuit court that there is no Indiana state law on the issue before
           us, so there can be no conflict with Illinois law. The two federal cases upon which Pekin
           relies merely acknowledge that they can only attempt to ‘predict’ Indiana law because
           there has been no state court decision on the issue. [Citation.] Accordingly, we cannot
           conclude that the federal cases represent Indiana state law for the purposes of engaging
           in a choice of law analysis. Therefore, since there is no Indiana state law on the issue of
           whether there can be coverage for a TCPA claim under an ‘advertising injury’ provision
           in an insurance policy, there can be no conflict with Illinois law, and Illinois law applies
           here.” Pekin Insurance, 2011 IL App (1st) 102769, ¶ 23.
¶ 13       The trial court here found that Pekin constrained the analysis of the case and left the court
       unable to conduct an independent analysis. Following Pekin, the court found that State Farm
       had not shown that Indiana law conflicted with Illinois law on the question at issue in this
       case, so Illinois law applied. The trial court also held that the alleged faxes caused
       advertising injury and accidental property damage, within the meaning of State Farm’s
       policy. The trial court denied State Farm’s motion for summary judgment and granted
       summary judgment in favor of Bridgeview, holding that State Farm had a duty to defend
       Clark in the underlying lawsuit. The trial court found no just cause to delay enforcement or
       appeal of its judgment. State Farm now appeals.

¶ 14                                        ANALYSIS
¶ 15       Supreme Court Rule 304(a) gives this court jurisdiction to consider this appeal. Ill. S. Ct.
       R. 304(a) (eff. Feb. 26, 2010). We review de novo an order granting a motion for summary
       judgment. Outboard Marine Corp. v. Liberty Mutual Insurance Co., 154 Ill. 2d 90, 102
       (1992).
¶ 16       State Farm concedes that the trial court correctly applied the reasoning of Pekin. State
       Farm and the American Insurance Association (AIA), which filed an amicus curiae brief,
       argue that the appellate court decided Pekin wrongly. According to State Farm and AIA, the
       federal decisions predicting Indiana law show a conflict between Indiana law and Illinois law
       on the issue of whether the commercial liability policy at issue here provides coverage for
       the alleged violation of the TCPA and the alleged conversion of Bridgeview’s property. State
       Farm and AIA also contend that under general choice-of-law principles, Indiana law governs
       the dispute.

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¶ 17       When this court must resolve a case in which multiple jurisdictions have an interest, this
       court must first determine whether the laws of the interested jurisdictions conflict. See
       Allianz Insurance Co. v. Guidant Corp., 373 Ill. App. 3d 652, 658 (2007). This court needs
       to determine which jurisdiction’s law applies only when “a difference in law will make a
       difference in the outcome.” Townsend v. Sears, Roebuck & Co., 227 Ill. 2d 147, 155 (2007).
¶ 18       Our supreme court’s decision in Valley Forge Insurance Co. v. Swiderski Electronics,
       Inc., 223 Ill. 2d 352 (2006), establishes that if Illinois law applies, State Farm has a duty to
       defend Clark. In Valley Forge, our supreme court held that a commercial liability policy
       much like the policy at issue here required the insurer to defend its insured against a charge
       that the insured violated the TCPA by sending unsolicited faxes. The Valley Forge court held
       that the faxes allegedly breached the recipient’s privacy interests, and thus they caused
       “advertising injury” within the meaning of the policy’s coverage. Valley Forge, 223 Ill. 2d
       at 368.
¶ 19       No decision of any Indiana state court establishes what result would follow if Indiana law
       applies. When other courts have found the law of another interested jurisdiction uncertain,
       those courts have undertaken a choice-of-law analysis to decide which jurisdiction’s law
       applies. As the court said in Sterling Finance Management, L.P. v. UBS PaineWebber, Inc.,
       336 Ill. App. 3d 442, 451 (2002), “[b]ased on the uncertainty of New York law, *** we
       believe it prudent to consider that an actual conflict may exist between New York and Illinois
       law and undertake a choice-of-law analysis.” And similarly, the court in Associated Press
       v. All Headline News Corp., 608 F. Supp. 2d 454, 459-60 (S.D.N.Y. 2009), said:
                “The plaintiff argues that no conflict exists between the laws of New York and
           Florida, and that a claim for hot news misappropriation ‘would’ be recognized under
           Florida law. *** No authority has been cited to show that Florida recognizes a cause of
           action for hot news misappropriation. Then again, defendants have not persuasively
           demonstrated that Florida would not recognize such a claim. Because of the uncertainty
           as to whether an actual conflict exists, I will assume for the purposes of this motion that
           there is such a conflict, and proceed to the next step of a choice-of-law analysis.”
           (Emphasis in original.)
¶ 20       The analysis undertaken in Sterling and Associated Press comports with the application
       of the choice-of-law doctrine in Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 818 (1985).
       In Shutts, the Kansas Supreme Court applied Kansas substantive law to a dispute over
       royalties despite Oklahoma’s contacts with the case. The Kansas court found a defendant
       from Oklahoma liable and awarded the plaintiff interest in accord with Kansas’s decisions.
       The United States Supreme Court noted that no Oklahoma decision dealt with the interest
       liability for suspended royalties, and the court noted that an Oklahoma statute allowed
       interest at a rate lower than the rate of interest the Kansas court awarded. Shutts, 472 U.S.
       at 816-17. The dissent pointed out that a Kansas statute closely matched the Oklahoma
       statute the majority cited, but the Kansas court held that the statute did not limit the interest
       available to the plaintiffs under the circumstances of the case. Shutts, 472 U.S. at 831 n.10
       (Stevens, J., concurring in part and dissenting in part). Despite the lack of a clear conflict
       between the pertinent laws of Kansas and Oklahoma, the Court found that the application of
       Kansas substantive law to the claims against the Oklahoma defendant violated that

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       defendant’s constitutional rights and required a remand for the Kansas court to determine
       anew what state’s law applied to each transaction at issue. Shutts, 472 U.S. at 823.
¶ 21        In addition, the analysis undertaken in Sterling and Associated Press serves the purposes
       of the choice-of-law doctrine. The United States Supreme Court explained, “The purpose of
       a conflict-of-laws doctrine is to assure that a case will be treated in the same way under the
       appropriate law regardless of the fortuitous circumstances which often determine the forum.”
       Lauritzen v. Larsen, 345 U.S. 571, 591 (1953). When the courts of one state have not spoken
       to an issue, their eventual resolution of the issue might conflict with the resolution reached
       in another state. If the forum applies its own law simply because the other interested
       jurisdictions have not spoken on the issue, the result of the case may well depend on the
       fortuitous circumstances that determine the forum.
¶ 22        Therefore, because the decision in Pekin conflicts with better reasoned cases and the
       purpose of the choice-of-law doctrine, we do not follow Pekin insofar as the court in Pekin
       said, “there is no Indiana state law on the issue before us, so there can be no conflict with
       Illinois law.” Pekin Insurance, 2011 IL App (1st) 102769, ¶ 23. Instead, we find that because
       the application of Indiana law could possibly lead to a different result than that reached under
       Illinois law, the trial court must first determine which state has the most significant contacts
       to the dispute, and then apply to the dispute the law of the state with the most significant
       contacts. See United Farm Family Mutual Insurance Co. v. Frye, 381 Ill. App. 3d 960, 965
       (2008). If the trial court finds that Indiana has the most significant contacts to the dispute,
       it must attempt to determine what Indiana courts would do in this case. Because no published
       decision of any Indiana state court has addressed the determinative issues in this case, the
       trial court should use decisions from the federal courts and the courts of other states, as well
       as law reviews, treatises, and other sources, in an attempt to predict how the Indiana courts
       would decide the determinative issues here. Accordingly, we hold that the potential for
       conflict between Indiana law and Illinois law requires the trial court to engage in a choice-of-
       law analysis for the case.

¶ 23                                       CONCLUSION
¶ 24       This lawsuit raises the issue of whether an insurer that provides coverage for accidental
       property damage and advertising injury must defend an insured against charges that it sent
       unsolicited faxes. Because Indiana state courts have not yet addressed this issue, the potential
       conflict with Illinois law requires the trial court to determine whether Illinois law or Indiana
       law governs this coverage dispute. We reverse the trial court’s judgment and remand for
       further proceedings in accord with this opinion.

¶ 25      Reversed and remanded.




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