                             2015 IL App (2d) 150016
                                   No. 2-15-0016
                          Opinion filed December 23, 2015
______________________________________________________________________________

                                            IN THE

                             APPELLATE COURT OF ILLINOIS

                              SECOND DISTRICT
______________________________________________________________________________

ILLINOIS CASUALTY COMPANY,                   ) Appeal from the Circuit Court
                                             ) of Lake County.
       Plaintiff and Counterdefendant-       )
       Appellee,                             )
                                             )
v.                                           ) No. 09-MR-844
                                             )
WEST DUNDEE CHINA PALACE                     )
RESTAURANT, INC.,                            )
       Defendant,                            )
                                             )
(Wellington Homes, Inc., Individually and on ) Honorable
Behalf of All Others Similarly Situated,     ) Diane E. Winter,
Defendant and Counterplaintiff-Appellant).   ) Judge, Presiding.
______________________________________________________________________________

       JUSTICE McLAREN delivered the judgment of the court, with opinion.
       Justices Jorgensen and Birkett concurred in the judgment and opinion.

                                               OPINION

¶1     This is a declaratory judgment action involving a dispute over insurance coverage for a

fax-blast case. The issue is whether plaintiff Illinois Casualty Company’s (ICC) policy exclusion

(hereinafter Laws exclusion) applies to the allegations in the complaint in the underlying

litigation. If the Laws exclusion applies, then ICC’s duty to defend defendant, West Dundee

China Palace Restaurant, Inc. (West Dundee), was never triggered.         On cross-motions for

summary judgment, the trial court initially ruled that ICC had a duty to defend. On a motion to

reconsider, the trial court ruled that ICC had no duty to defend or indemnify. We affirm.
2015 IL App (2d) 150016


¶2                                     I. BACKGROUND

¶3                      A. The Underlying Litigation (No. 09-CH-1577)

¶4     The following pertinent facts are taken from the record on appeal. On August 4, 2009,

Wellington Homes, Inc., individually and as the representative of a class of all others similarly

situated (Wellington), filed a second amended complaint against West Dundee, Zhaowei Li, and

Liwen She. On November 18, 2010, Wellington filed a third amended complaint against West

Dundee, Ahmad Azmi, and Tehmini Azmi. The complaint’s preliminary “Statement” began:

“This case challenges [West Dundee’s] practice of faxing unsolicited advertisements.” The

preliminary “Statement” further alleged that “The federal [Telephone Consumer Protection Act

of 1991 (TCPA) (47 U.S.C. § 227 et seq. (2000))], prohibits a person or entity from faxing or

having an agent fax advertisements without the recipient’s prior express invitation or permission.

The TCPA provides a private right of action and provides statutory damages of $500 per

violation.”

¶5     The complaint contained three counts: count I alleged a violation of the TCPA; count II

alleged conversion; and count III alleged violations of the Illinois Consumer Fraud and

Deceptive Business Practices Act (815 ILCS 505/1 et seq. (West 2010)).               Each count

incorporated the same factual allegations: on or about May 16, 2006, West Dundee faxed to

Wellington an advertisement, which was attached to the complaint as “Exhibit A”; Wellington

had not invited or given West Dundee permission to fax advertisements to it; and West Dundee

faxed “the same or similar unsolicited facsimiles” to “more than 39 other recipients without first

receiving the recipients’ express permission or invitation. [West Dundee’s] facsimiles did not

display a proper opt out notice as required by 64 C.F.R. 1200.”

¶6     Count I of the complaint proposed the following class:



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       “All persons who (1) on or after four years prior to the filing of this action, (2) were sent

       telephone facsimile messages of material advertising the commercial availability of any

       property, goods, or services by or on behalf of [West Dundee], (3) with respect to whom

       [West Dundee] cannot provide evidence of prior express permission or invitation for the

       sending of such faxes, (4) with whom [West Dundee] does not have an established

       business relationship, and (5) which did not display a proper opt out notice.”

The class proposed in count II was: “All persons who on or after a date of five years prior to the

filing of this action, were sent telephone facsimile messages by or on behalf of [West Dundee].”

The class proposed in count III was: “All persons in Illinois who on or after a date of three years

prior to the filing of this action, were sent telephone facsimile messages by or on behalf of [West

Dundee].”

¶7                   B. The Declaratory Judgment Action (No. 09-MR-844)

¶8     West Dundee and the individual defendants failed to answer ICC’s complaint and the

trial court entered default judgments in ICC’s favor and against them, stating, “this Order is not

binding on [Wellington] with respect to any argument they may have regarding whether there is

insurance coverage.” ICC filed a complaint and an amended complaint for declaratory judgment

against West Dundee and Wellington.

¶9     On February 3, 2010, Wellington filed a counterclaim for declaratory judgment against

ICC, alleging that ICC owed a duty to defend and indemnify West Dundee in the underlying

lawsuit. On March 8, 2011, ICC filed the present second amended complaint for declaratory

judgment, alleging that it had no duty to defend or indemnify because the policy does not apply

to the allegations in the underlying complaint, due to the following exclusions:

               “A. Coverages

                      1. Bodily Injury And Property Damage

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2015 IL App (2d) 150016


                                             ***

                             g. Exclusions―Applicable To Bodily Injury And/Or Property

                      Damage

                             This insurance does not apply to:

                                                 ***

                                    (4) Laws

                                            Any liability or legal obligation of any insured with

                                    respect to ‘bodily injury’ or ‘property damage’ arising out

                                    of any of the following:

                                            (g) The Telephone Consumer Protection Act

                                    (TCPA); or

                                            (h) Any amendments to these other laws or by any

                                    other similar statutes, ordinances, orders, directives or

                                    regulations.”

¶ 10   ICC and Wellington filed cross-motions for summary judgment. On October 11, 2011,

the trial court, Judge David M. Hall presiding, denied ICC’s motion for summary judgment and

granted in part Wellington’s motion for summary judgment, ruling that ICC “had a duty to

defend in the underlying action.” The trial court did not decide the issue of whether ICC had a

duty to indemnify. On February 21, 2013, ICC filed a motion to reconsider, which the trial court

denied on July 11, 2013. On May 20, 2014, ICC filed a “Surreply In Support of [Its] Motion to

Reconsider,” citing this court’s May 2, 2014, decision, G.M. Sign, Inc. v. State Farm Fire &

Casualty Co., 2014 IL App (2d) 130593.

¶ 11   On December 2, 2014, the trial court, Diane E. Winter presiding, (1) granted ICC’s

motion to reconsider based on G.M. Sign; (2) vacated the summary judgment order in favor of

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Wellington and against ICC; (3) ruled that ICC had no “duty or obligation to defend or

indemnify” West Dundee for liability or damages arising from the underlying lawsuit; and (4)

entered summary judgment in favor of ICC and against Wellington and West Dundee “on all

counts of [ICC’s] Complaint for Declaratory Judgment” and denied summary judgment “with

respect to [Wellington’s] Counterclaim for Declaratory Judgment.”        The trial court stated,

“Based on the reasoning and holding of the G.M. Sign v. State Farm decision, the court finds the

ICC policy exclusion language would apply to all counts of Wellington’s underlying complaint

and therefore, did not trigger a duty to defend or indemnify under the policy.” Wellington filed

its notice of appeal on December 30, 2014.

¶ 12                                     II. ANALYSIS

¶ 13   This matter is before us on the grant of summary judgment in favor of ICC. Summary

judgment is appropriate where the pleadings, depositions, and admissions on file, together with

any affidavits and exhibits, when viewed in the light most favorable to the nonmoving party,

indicate that there is no genuine issue of material fact and that the moving party is entitled to

judgment as a matter of law. 735 ILCS 5/2-1005(c) (West 2014). We review de novo a trial

court’s entry of summary judgment. Standard Mutual Insurance Co. v. Lay, 2013 IL 114617, ¶

15.

¶ 14   ICC and Wellington sought declaratory judgments on insurance coverage. Wellington’s

underlying lawsuit is currently pending against West Dundee. The trial court ruled that ICC’s

Laws exclusion applied to the underlying complaint and that therefore ICC had no duty to defend

or indemnify West Dundee. Wellington argues that the trial court erred because: (1) ICC’s Laws

exclusion is limited to liability under the TCPA; and (2) even if the exclusion language at issue

in G.M. Sign, 2014 IL App (2d) 130593, is the same as the Laws exclusion, ICC has a duty to

defend based on other Illinois cases.

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¶ 15   In a declaratory judgment action such as the case at bar, where the issue is whether the

insurer has a duty to defend pursuant to an insurance policy, a court ordinarily looks first to the

allegations in the underlying complaint and compares those allegations to the relevant provisions

of the insurance policy. Pekin Insurance Co. v. Wilson, 237 Ill. 2d 446, 455 (2010); Outboard

Marine Corp. v. Liberty Mutual Insurance Co., 154 Ill. 2d 90, 107-08 (1992). “An insurer may

not justifiably refuse to defend an action against its insured unless it is clear from the face of the

underlying complaints that the allegations fail to state facts which bring the case within, or

potentially within, the policy’s coverage.” (Emphasis in original.) United States Fidelity &

Guaranty Co. v. Wilkin Insulation Co., 144 Ill. 2d 64, 73 (1991). However, an insurer may

properly refuse to defend if it is clear from the face of the complaint that the allegations fail to

state facts that bring the case within, or potentially within, the policy’s coverage. Id.; Erie

Insurance Exchange v. Compeve Corp., 2015 IL App (1st) 142508, ¶ 17. Moreover, where a

court properly holds that an insurer has no duty to defend, the court may also hold that the

insurer has no duty to indemnify. West Bend Mutual Insurance Co. v. Rosemont Exposition

Services, Inc., 378 Ill. App. 3d 478, 486 (2007).

¶ 16   When construing the language of an insurance policy, a court’s primary objective is to

ascertain and give effect to the intentions of the parties as expressed in their insurance contract.

Wilson, 237 Ill. 2d at 455. To ascertain the meaning of the policy’s language and the parties’

intent, the court must construe the policy as a whole and consider the type of insurance

purchased, the nature of the risks involved, and the overall purpose of the insurance contract.

Travelers Insurance Co. v. Eljer Manufacturing, Inc., 197 Ill. 2d 278, 292 (2001); Outboard

Marine, 154 Ill. 2d at 108. If the words of the policy are clear and unambiguous, the court must

afford them their plain and ordinary meaning. Id. The underlying complaint and insurance

policy must be liberally construed in favor of the insured in determining whether there is a duty

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to defend. Wilkin Insulation, 144 Ill. 2d at 74. The construction of the provisions of an

insurance policy involves a question of law, which we review de novo. See Wilson, 237 Ill. 2d at

455; Outboard Marine, 154 Ill. 2d at 108.

¶ 17   Here, the trial court determined that this case is controlled by G.M. Sign, 2014 IL App

(2d) 130593. In G.M. Sign, this court held that an insurer had no duty to defend in an underlying

fax-blast class-action lawsuit alleging (1) violations of the TCPA, (2) common-law conversion,

and (3) violations of the Illinois Consumer Fraud and Deceptive Business Practices Act. G.M.

Sign, 2014 IL App (2d) 130593, ¶ 6. The insurer’s policy excluded coverage for “ ‘[b]odily

injury, property damage, personal injury, or advertising injury arising directly or indirectly out of

any action or omission that violates or is alleged to violate *** [t]he Telephone Consumer

Protection Act (TCPA), including any amendment of or addition to such law; or *** [a]ny

statute, ordinance or regulation, other than the TCPA *** that prohibits or limits the sending,

transmitting, communicating or distribution of material or information.’ ” (Emphasis omitted.)

Id. ¶ 8. Regarding the second and third claims, this court determined that the duty to defend was

not triggered, because these claims were premised on the same facts alleged in the TCPA claim

and were otherwise intentionally vague. Id. ¶¶ 30-34.

¶ 18   In this case, Wellington recognizes that the Laws exclusion applies to its first count,

alleging violations of the TCPA. However, Wellington argues that the remaining two counts,

alleging common-law conversion and violations of the Illinois Consumer Fraud and Deceptive

Business Practices Act, are sufficient to trigger a duty to defend, because the Laws exclusion is

different from the exclusion at issue in G.M. Sign. Wellington notes that the exclusion in G.M.

Sign excluded coverage for “ ‘[b]odily injury, property damage, personal injury, or advertising

injury arising directly or indirectly out of any action or omission that violates or is alleged to

violate *** [t]he Telephone Consumer Protection Act (TCPA), including any amendment of or

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2015 IL App (2d) 150016


addition to such law ***.’ ” (Emphasis in original.) Id. ¶ 8. Wellington argues that, because the

Laws exclusion does not contain the words “directly or indirectly,” coverage is excluded only for

liability and legal obligations arising out of the TCPA itself. We disagree with Wellington.

¶ 19   The allegations in the remaining two counts of the underlying complaint completely fail

to state facts that either actually or potentially bring the case within, or potentially within, the

policy’s coverage. The policy excludes “[a]ny liability or legal obligation of any insured with

respect to *** ‘property damage’ arising out of *** The Telephone Consumer Protection Act

(TCPA); or *** any other similar statutes, ordinances, directives, orders or regulations.” Counts

II and III allege that West Dundee is liable for common-law conversion in that it sent

“unsolicited faxes,” and “converted [the underlying plaintiffs’] fax machines, toner, paper, and

employees’ time” to its own use and that it violated the Illinois Consumer Fraud and Deceptive

Business Practices Act by engaging in the unfair practice of “sending unsolicited and

unauthorized faxes.” Common to all three counts are allegations that West Dundee sent the

unsolicited faxes without the express permission or invitation of the underlying plaintiffs and

that the faxes did not display a “proper opt out notice as required by 64 C.F.R. 1200.” 1 Common


       1
           The TCPA prohibits the sending of an “unsolicited advertisement” to a “telephone

facsimile machine” unless the sender has consent or an established business relationship with the

recipient and the advertisement contains an opt-out notice “meeting the requirements under

paragraph (2)(D).” 47 U.S.C. § 227(b)(1)(C)(iii) (2012). The statute itself does not expressly

require that an opt-out notice be included in solicited or consented-to fax advertisements.

However, the most pertinent regulation extends the opt-out-notice requirement to such fax

advertisements, stating: “A facsimile advertisement that is sent to a recipient that has provided

prior express invitation or permission to the sender must include an opt-out notice that complies


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to all three counts is the allegation that West Dundee sent to the underlying plaintiffs faxes that

marketed its goods or services.

¶ 20      The underlying complaint must be read as a whole to assess its true nature. American

Family Mutual Insurance Co. v. Roth, 381 Ill. App. 3d 760, 766 (2008). Further, little weight is

given to the legal label under which a count is brought; rather, the determination regarding

whether there is a duty to defend focuses on the conduct alleged. Id. at 765. In the underlying

complaint here, although count II is labeled “conversion” and count III is labeled “Illinois

Consumer Fraud and Deceptive Business Practices Act,” the conduct alleged in those counts

constitutes nothing more than a rephrasing of the conduct alleged in count I; that West Dundee

violated the TCPA by “sending advertising faxes to [the underlying plaintiffs] without first

obtaining their prior express permission or invitation.” All three counts allege property damage

arising out of the TCPA, similar statutes, or orders. See Northbrook Property & Casualty Co. v.

Transportation Joint Agreement, 194 Ill. 2d 96, 99 (2000). Therefore, Wellington’s complaint

did not trigger ICC’s duty to defend.

¶ 21      Wellington criticizes G.M. Sign, 2014 IL App (2d) 130593, as absolving the insurer, State

Farm, of its duty to defend, based on the underlying complaint’s “vagueness.” Wellington

argues that ICC has a duty to defend because the “bare allegations of the complaint leave open

the possibility” of coverage. Wellington cites Illinois Tool Works, Inc. v. Travelers Casualty &

Surety Co., 2015 IL App (1st) 132350, for the proposition that “vague, ambiguous allegations

against an insured should be resolved in favor of finding a duty to defend.” Id. ¶ 26. Illinois

Tool Works is distinguishable from the case at car.


with the requirements in paragraph (a)(4)(iii) of this section.” 47 C.F.R. § 64.1200(a)(4)(iv)

(2013).


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¶ 22   Illinois Tool Works involved a myriad of toxic-tort cases where the plaintiffs alleged that

while working as welders they were injured when they were exposed to hazardous chemicals

manufactured by Illinois Tool Works and other manufacturers. Id. ¶ 4. Some of the lawsuits

alleged that exposure to Illinois Tool Works products resulted in injuries, but they did not

specifically allege when the exposure or injuries occurred. Id. ¶ 23. All of the insurers’ policies

contained provisions that required the insurers to defend Illinois Tools Works in any suit brought

against it for bodily injury, even if the allegations in the suit were false or groundless. Id. ¶ 5.

The parties did not dispute whether the injuries alleged in the underlying complaints would be

covered by the policies. Id. Rather, the insurers argued that they had no duty to defend because

in some of the complaints there were no allegations regarding when the injuries occurred and

therefore, it was unknown whether Illinois Tool Works was covered by the policies. Id. ¶ 10.

The appellate court held that “the time of the injury is a factual uncertainty that, until resolved,

gives rise to the duty to defend.” Id. ¶ 29.

¶ 23   In this case, there is no factual uncertainty regarding time or anything else that is

relevant. Wellington’s underlying three-count complaint alleges that, on one specific date, West

Dundee faxed one specific unsolicited one-page advertisement to the underlying plaintiffs. Thus,

all three counts alleged property damage explicitly excluded by ICC’s policy. Therefore, Illinois

Tool Works is distinguishable from this case.

¶ 24   Next, Wellington argues that the Laws exclusion is inapplicable because “arising from”

must be interpreted narrowly and therefore we should apply a “proximate cause” construction

rather than a “but for” construction. Wellington argues that the broader “but for” construction is

applicable only to coverage provisions, whereas the narrower “proximate cause” construction is

applicable to exclusion provisions. Wellington criticizes G.M. Sign, 2014 IL App (2d) 130593,

as interpreting “arising from” broadly and applying the “but for” causation test to expand the

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2015 IL App (2d) 150016


exclusion. This argument is confusing because it is neither a reasonable interpretation of the

policy language nor supported by case law.

¶ 25      Although policy terms that limit an insurer’s liability are liberally construed in favor of

coverage, this rule of construction applies only when the policy is ambiguous.             Hobbs v.

Hartford Insurance Co. of the Midwest, 214 Ill. 2d 11, 17 (2005). A term is ambiguous when it

is subject to more than one reasonable interpretation. Id. We “are not authorized to exercise our

inventive powers and pervert the plain language of the policy in order to create an ambiguity

where none exists.” Oakley Transport, Inc. v. Zurich Insurance Co., 271 Ill. App. 3d 716, 722

(1995).

¶ 26      In this case, Wellington attempts to create an ambiguity where none exists. Where a term

in an insurance policy is not defined, we afford that term its plain, ordinary, and popular

meaning; that is, we look to its dictionary definition. See Founders Insurance Co. v. Munoz, 237

Ill. 2d 424, 436 (2010). “Arise” means to “originate; to stem (from).” Black’s Law Dictionary

115 (8th ed. 2004). These definitions confirm that the policy excludes coverage for “[a]ny

liability or legal obligation of any insured with respect to *** ‘property damage’ [originating or

stemming from] *** The Telephone Consumer Protection Act (TCPA); or *** any other similar

statutes, ordinances, directives, orders or regulations.” Wellington offers no other reasonable

interpretation of the Laws exclusion. Therefore, the plain language of the policy excludes

coverage for property damage as alleged in Wellington’s complaint. Accordingly, the trial court

properly granted summary judgment in ICC’s favor and against Wellington.

¶ 27      Wellington cites United Services Automobile Ass’n v. Dare, 357 Ill. App. 3d 955, 969-70

(2005), and Oakley, 271 Ill. App. 3d 716, to support its argument. In Dare, the appellate court

determined that the insurer had a duty to defend because the terms “ownership” and

“maintenance” were ambiguous and, therefore, the provisions had to be resolved against the

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insurer and in favor of coverage. Dare, 357 Ill. App. 3d at 968, 971. In this case no term at issue

is ambiguous. Therefore, Dare is distinguishable from this case.

¶ 28   In Oakley, the appellate court held that there was no coverage because the term “arising

out of” contained in a policy exclusion was not ambiguous and, therefore, the term would not be

construed in favor of coverage. Oakley, 271 Ill. App. 3d at 721-22. In this case, we, like the

Oakley court, determine that “arising from” is not ambiguous and that therefore we need not

construe the term in favor of coverage. Accordingly, Oakley does not support Wellington’s

argument.

¶ 29   Lastly, we take issue with Wellington’s assertion that in G.M. Sign, Inc. v. Schane, 2013

IL App (2d) 120434, this court held that “G.M. Sign filed an amended complaint, which

potentially brought the claims within the insurance policy.” Id. ¶ 41. Wellington quotes Schane

out of context. Wellington’s misuse of this sentence is disingenuous at best. As we have

previously explained, “we reject [the] assertion that in Schane we determined that the amended

complaint alleged claims that potentially fell within coverage.” 2 .G.M. Sign, 2014 IL App (2d)

130593, ¶ 39. Accordingly, nothing in Schane supports Wellington’s positions or conflicts with

this opinion.


       2
           We further explained, “we assumed, without deciding, that for the purpose of

demonstrating State Farm’s due diligence with respect to the original action, the amended

complaint potentially brought the claims stated therein within coverage. We said, in other

words, that, even if the amended complaint stated claims that potentially would trigger coverage,

State Farm’s refusal to defend did not indicate a lack of due diligence, because the amended

complaint was filed only after the case was settled. Nothing in the present opinion conflicts with

Schane.” (Emphasis in original.) G.M. Sign, 2014 IL App (2d) 130593, ¶ 40.


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¶ 30                                   III. CONCLUSION

¶ 31   For the reasons stated, we affirm the trial court’s judgment.

¶ 32   Affirmed.




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