In Standard Mut. Ins. Co. v. Lay, 2014 Il App (4th) 110527-B, the Fourth District found that three policies issued by Standard Mutual Insurance Company (“Standard”) provided coverage for a class action lawsuit stemming from a violation of the Telephone Consumer Protection Act of 1991. Theodore W. Lay, d/b/a Ted Lay Real Estate Agency (“Lay”) hired a fax broadcaster to “blast fax” an advertisement for a property listing. Lay was under the impression that those who received the fax had consented to receipt, but Lay was mistaken and an underlying class action ensued. Locklear Electric, Inc. (“Locklear”), one of fax recipients, acted as class representative. Lay tendered to its carrier, Standard, which defended under a reservation of rights, initially with a waiver by Lay, but later with independent conflict counsel chosen by Lay’s estate. New counsel settled the matter and both parties moved for summary judgment in the declaratory action. The trial court granted summary judgment, the appellate court affirmed, and the Supreme Court affirmed in part and reversed in part, remanding the case back to this court for consideration of other issues.
Locklear argued that all policies issued to Lay provided coverage, coverage was available under both the advertising injury and property damage provisions of the property, and Lay’s estate had the right to settle the underlying action. Standard countered that there was no coverage under two out of three policies because they were for lessor’s risks only, the class action did not allege advertising injury or property damage, exclusions for professional services and intentional actions excluded coverage, and Lay’s estate had no right to settle without Standard’s consent.
The Fourth District on remand held that the general liability policy and business policy for lessor’s risk all provided coverage. The court noted the policies did not contain “designated premises” limitations, which would have limited their application to liability coverage for activities arising out of the use of those premises. The court also held the professional services exclusion was not applicable as Lay was a real estate agency, and the claim was based on Lay’s tortious conduct ancillary to the performance of real estate service. The court further noted the complaint properly alleged “property damage” and while Lay’s actions were intentional, the intentional actions exclusion did not apply because Lay’s “negligent conduct” was covered. Additionally, the complaint alleged “personal and advertising injury” because it alleged the faxes violated the fax recipient’s right to privacy. Finally, since a conflict of interest existed, Standard had no right to require Lay to obtain permission to settle the underlying suit or object to it itself.
This case reinforces prior decisions holding that TCPA claims are potentially covered under a wide-array of policies. While the court found coverage, it appeared reluctant to do so, noting the true purpose of the TCPA is to address telemarketing abuses attributable to the use of automated telephone calls to devices including telephones, cellular telephones, and fax machines. By allowing liability for telemarketing abuses to be covered by insurance, the court noted the company responsible for the abuses has no incentive to stop the abuses from occurring in the future and the purpose of the TCPA is unfulfilled.