WWM Secures Summary Judgment Ruling for Client in Coverage and Bad Faith Action

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On May 21, 2018, Walker Wilcox Matousek obtained summary judgment for Federal Insurance Company in the U.S. District Court for the Southern District of Illinois in Market Street Bancshares, Inc. v. Federal Insurance Company, 3:17-CV-00036-NJR-SCW (S.D. Ill. May 21, 2018).

In the declaratory judgment action, the insured sought defense, indemnity and statutory bad faith damages from Federal under a claims made liability policy issued from 2014 to 2017 in connection with an underlying lawsuit filed in 2003 alleging breach of contract, conversion and breach of fiduciary duty.  The underlying lawsuit resulted in a verdict against the insured in excess of $16 million.

On behalf of Federal, WWM removed the case to federal court and filed a counterclaim for declaratory judgment against the insured.  After conducting minimal discovery, the parties filed cross-motions for summary judgment.  Federal argued that it had no duty to defend or indemnify the insured for the 2003 underlying lawsuit because the lawsuit was not first made during the 2014 to 2017 Federal policy.  Federal alternatively argued that even if, as the insured alleged, the damages sought by the claimants in the underlying trial somehow constituted a new claim, the Related Acts provision unambiguously precluded coverage, since any new damages asserted at trial were necessarily related to the 2003 complaint.

The insured argued that the claimants’ request for damages during the 2016 trial pursuant to a contract, which had not been referenced in any pleadings or entered into evidence prior to trial, constituted a new, timely claim under the policy.  The insured also argued that the Related Acts provision is ambiguous and thus, should be interpreted in favor of the insured.  The insured further argued that Federal was estopped from denying coverage pursuant to the Illinois estoppel doctrine.

In granting judgment in Federal’s favor, the Southern District of Illinois held that the claim was first made in 2003 and that any damages sought during the underlying trial were merely variations of the damages alleged in the complaint.  The Court held alternatively that even if the damages asserted at trial constituted a new action, the Related Claims provision unambiguously precluded coverage.  The Court rejected the insured’s estoppel argument and correctly held that the doctrine was inapplicable, since Federal had no duty to defend and thus, did not wrongfully deny coverage.

Federal Insurance Company was represented by the WWM team of Ed Gibbons and Kaitlin Calov.

WWM Wins Dismissal of Putative Class Action Against Property Management Company

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On April 24, 2018, WWM attorneys Ed Gibbons, Arthur McColgan, and Scott Stirling successfully obtained dismissal of a putative class action filed against WWM client Sudler and Company, in the District Court for the Northern District of Illinois. Horist v. Sudler and Company, Case No. 17 C 8113. (Click here for the Order.)

Plaintiffs brought suit under the Illinois Condominium Property Act (“Condo Act”) and the Illinois Consumer Fraud and Deceptive Practices Act (“ICFA”), and asserted common law causes of action, alleging that Sudler – a property management company – and co-defendant, HomeWise, overcharged for documentation needed in connection with selling one’s condo. Specifically, they claimed that Defendants turned the process of selling one’s condo into a “profit center” by causing the associations managed by Sudler to stop providing disclosure documents, which effectively forced sellers to utilize HomeWise, which in turn overcharged for providing the documents. Sudler and HomeWise both filed motions to dismiss.

Judge Robert Gettleman agreed with Sudler that Plaintiffs’ complaint did not contain any factual allegations that the Defendants somehow caused the associations to stop providing disclosure documents. Because of these missing facts, Judge Gettleman found that Plaintiffs did not allege an unfair practice or a violation of the ICFA.

Furthermore, Judge Gettleman held that the Condo Act does not provide a private right of action for its enforcement. In order to state a claim for violations under the Condo Act, Plaintiffs needed to establish an implied right of action in their favor, which they could not, because the Act is meant to protect buyers and associations, not sellers. Accordingly, Judge Gettleman granted the Defendants’ motions to dismiss.

WWM Wins Dismissal of Coverage Case Arising From TCPA Class Action

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On April 30, 2018, WWM attorneys Ed Gibbons, Arthur McColgan, and Jeremy Kerman won a motion to dismiss on behalf of WWM client ACE American Insurance Co., in the U.S. District Court for the Southern District of New York. Flores v. ACE American Ins. Co., No. 1:17-CV-08674.  (Click here for order.)

In an underlying suit, Plaintiff Victoria Flores filed a class action lawsuit against ACE’s insured – Grubhub. The complaint alleged that Grubhub violated the Telephone Consumer Protection Act (“TCPA”) by sending unauthorized text messages to thousands of consumers. Eventually, Flores and Grubhub entered into a Settlement Agreement which provided for an $8 million consent judgment. As part of the settlement, Grubhub assigned to Flores all claims and proceeds under the Grubhub insurance policy issued by ACE, and the parties agreed that the $8 million consent judgement would be paid only out of the proceeds of the Grubhub insurance policy with ACE.

Flores then brought a declaratory judgment action seeking to collect the stipulated $8 million judgment from ACE.

ACE moved to dismiss the action, arguing that, under the policy, two separate exclusions precluded coverage of the claims in the underlying suit. The first was an exclusion for all claims based on “unsolicited electronic dissemination of . . . communications by or on behalf of the Insured to multiple actual or prospective customers,” explicitly including actions brought under the TCPA. The second exclusion excluded claims based on any “violation of consumer protection laws.”

In response, Flores argued that the TCPA exclusion does not apply to the type of communication described in the complaint – individual text messages which were tailored to each customer based on restaurants they had ordered from. Instead, she argued that the exclusion applied to messages or phone calls transmitted or made en massei.e., to multiple recipients at once – as part of spam or mass marketing campaigns. Flores also argued that the “consumer protection law” exclusion did not apply because the TCPA can reasonably be interpreted to be a “privacy regulation.”

Ultimately, Judge Alvin K. Hellerstein agreed with ACE that both exclusions applied. Judge Hellerstein opined that Flores was trying to read requirements into the TCPA exclusion that simply were not there. He wrote: “there is nothing in [the TCPA exclusion] requiring that the text messages sent to the customers be identical or sent at the same time,” and found that the exclusion was unambiguous and clearly excluded coverage. Judge Hellerstein also found Flores’ argument regarding the “consumer protection law” exclusion unpersuasive, writing that a Privacy Regulation as defined in the Policy refers to laws associated with the “control and use” of personal data which require commercial entities collecting such data to adopt security measures to avoid identity theft. That is not the purpose of the TCPA, and thus it is not a privacy regulation. Accordingly, Judge Hellerstein granted ACE’s motion to dismiss.