Why it matters

Indiana or Illinois? The Illinois Supreme Court’s decision to apply its own state law to a dispute over coverage for a Telephone Consumer Protection Act (TCPA) lawsuit led to a victory for the insured. The parties agreed that coverage for the suit was required if Illinois law applied. But the insurer contended that Indiana law should apply and that a conflict existed between the two states’ legal positions. Although no state courts in Indiana have opined on the issue of coverage for TCPA suits under commercial general liability policies, two federal district courts in the state had guessed that the Indiana Supreme Court would not require coverage. Those decisions conflict with Illinois law, the insurer said. But the Illinois Supreme Court was not convinced, finding that an actual conflict did not exist and that Illinois law should apply – leaving the insured with defense coverage for the TCPA suit.

Detailed Discussion

In yet another example of the proliferation of TCPA suits, Illinois-based Bridgeview Health Care Center filed suit against Affordable Digital Hearing after allegedly receiving unsolicited faxes. Affordable’s owner, Jerry Clark, was insured under a comprehensive general liability policy issued by State Farm. The policy was purchased through an Indiana agent and issued to Clark at a business address in Indiana.

State Farm accepted defense of the TCPA suit with a reservation of rights. Bridgeview filed a declaratory judgment action seeking a determination of the insurer’s rights and the parties filed cross motions for summary judgment.

The issue, as framed by the Illinois Supreme Court, was: “When a federal district court sitting in a sister state makes a prediction … that the supreme court of that state would resolve a legal issue in a way that is at odds with Illinois law, does that prediction, in itself, establish an actual conflict between the two states’ laws for purposes of a choice-of-law analysis?”

Although State Farm acknowledged that under Illinois law coverage was required under both the advertising injury and property damage provisions of the insurance policy, the insurer argued that Illinois law conflicted with Indiana law. Two federal district court decisions from the Southern District of Indiana predicted that the Indiana Supreme Court would hold that no coverage exists under a policy like Clark’s, State Farm said. Those decisions created a conflict with Illinois law, and Indiana law should apply because the state had more significant contacts with the dispute than Illinois.

But the Illinois Supreme Court disagreed. The federal court decisions were “predictive judgments” – really just a guess, and “such a prediction cannot, by itself, establish a conflict between state laws,” the court said. The court also noted that the decisions – issued in 2006 and 2008 – were based upon a Seventh U.S. Circuit Court of Appeals decision opining on how the Illinois Supreme Court would rule on the coverage issue, and the federal appellate panel guessed wrong.

The mere potential for a conflict between state laws is not sufficient to warrant a choice of law analysis, the court wrote, as applying Illinois law would result in no injury to State Farm if Indiana law is not in actual conflict with Illinois. “There is always a ‘potential’ for differences to arise on state-law questions, even on matters that have previously been addressed,” the court noted.

Lacking an actual conflict of state laws, the Illinois Supreme Court applied the law of its own state and granted Bridgeview’s summary judgment motion.

To read the decision in Bridgeview Health Care Center Ltd. v. State Farm Fire & Casualty Co., click here.