Ill. SC rules against State Farm in case over 'potential' conflict of states' laws

By Kyla Asbury | Jun 4, 2014

SPRINGFIELD, Ill. (Legal Newsline) - The Supreme Court of Illinois has awarded partial summary judgment in favor of Bridgeview Health Care Center Ltd. in a class action lawsuit.

The court on May 22 ruled an Indiana federal court's prediction under Erie v. Tompkins cannot, by itself, establish a conflict between state laws.

State Farm, the defendant in the case, maintained that the circuit court erred in granting Bridgeview's summary judgment motion because Indiana law applied. However, no Indiana state court has addressed the question of whether the sending of unsolicited faxes falls within a comprehensive liability policy's provisions, either as an advertising injury or as property damage, according to the opinion.

Justices Anne M. Burke delivered the judgment of the court and Justices Rita B. Garman, Charles E. Freeman, Robert R. Thomas, Thomas, Thomas L. Kilbride, Lloyd A. Karmeier and Mary Jane Theis concurred in the judgment and opinion.

"As the United States Supreme Court has observed, 'there can be no injury' in applying the local forum's law if that law is not in actual conflict with the law of another jurisdiction," the opinion states.

"There is always a 'potential' for differences to arise on state-law questions, even on matters that have previously been addressed. A 'potential' conflict standard would appear to create substantial uncertainty in deciding what law to apply. We adhere to settled law: a choice-of-law determination is required only when the moving party has established an actual conflict between state laws."

Bridgeview filed the three-count class action complaint in the federal district court of Northern Illinois against Jerry Clark, who is doing business as Affordable Digital Hearing.

Clark is an Illinois resident who operates Affordable Digital Hearing, a sole proprietorship dealing in the sale and repair of hearing aids, out of Terre Haute, Ind.

Bridgeview's complaint alleged that Clark sent Bridgeview and others across the United States unsolicited faxes in June of 2006.

Bridgeview sought recovery under the Telephone Consumer Protection Act and alleged that Clark was liable for common law conversion of Bridgeview's fax machine paper and toner. It also alleged that Clark violated the Consumer Fraud and Deceptive Business Practices Act.

Clark was insured under a comprehensive general liability policy issued by State Farm. The policy was purchased through an agent in Indiana and issued to Clark at his business address in Indiana.

The policy provided certain business liability coverage under both a "property damage" provision and an "advertising injury" provision.

Clark tendered defense of Bridgeview's suit to State Farm, which accepted the defense under a reservation of rights.

In June 2010, Bridgeview filed a declaratory judgment action against State Farm and Clark in Cook County, seeking a declaration that State Farm had a duty to defend and indemnify Clark because the unwanted faxes fell within both the advertising injury and property damage provisions of the insurance policy.

State Farm, in turn, filed a counterclaim against Bridgeview and Clark, seeking a declaration it had no duty to defend or indemnify Clark.

Both Bridgeview and State Farm moved for partial summary judgment on the question of whether State Farm had a duty to defend. In its motion, State Farm acknowledged that, under Illinois law, coverage was provided under both relevant provisions of the insurance policy.

Bridgeview argued there was no conflict between Indiana and Illinois law. Bridgeview also maintained that, even assuming Illinois and Indiana law were in conflict, Illinois had the most significant contacts and Illinois law should apply.

On May 17, 2012, the Cook County Circuit Court granted Bridgeview's motion for partial summary judgment and denied State Farm's motion.

However, an appellate court held that the federal decisions cited by State Farm were sufficient to raise the possibility of a conflict between Illinois and Indiana law and "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."

Apart from the Erie predictions made in the Indiana federal district court decisions, State Farm does not argue that Indiana law is in conflict with Illinois law, according to the opinion.

"Indeed, State Farm asserts that 'what the law of Indiana actually is has no bearing on the dispositive question presented in this appeal - whether a federal district court's Erie prediction can be the source of an outcome determinative conflict so as to trigger the most significant contacts test,'" the opinion states.

Because State Farm identifies no Indiana law on point, the Illinois Supreme Court concluded that State Farm has failed to meet its burden of demonstrating an actual conflict exists between Illinois and Indiana law.

Supreme Court of Illinois case number: 2014 IL 116389

From Legal Newsline: Kyla Asbury can be reached at classactions@legalnewsline.com.

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