Illinois Appellate Court Rejects Professional Liability Coverage for Junk Fax Claim

In Margulis v. BCS Insurance Co., 2014 IL App (1st) 140286, the Illinois Appellate Court affirmed a circuit court’s grant of summary judgment in favor of BCS Insurance Company (BCS), finding that it was not obligated to defend or indemnify its insured, Bradford & Associates (Bradford), under an insurance agents and brokers professional liability policy.  The Appellate Court concluded that Bradford’s alleged conduct did not arise out of Bradford’s business in “rendering service for others” as an insurance agent.

The underlying lawsuit arose out of a class action lawsuit filed by Scott Margulis against Bradford.  Margulis specifically alleged that Bradford had “transmitted unsolicited, automated telephone calls advertising its services” in violation of, in relevant part, the Telephone Consumer Protection Act (TCPA).  BCS disclaimed coverage.  Thereafter, Bradford and Margulis entered into a settlement agreement for $4,999,999, which was to be satisfied from only the proceeds of the insurance policies and claims against Bradford’s insurers.

Margulis, on behalf of himself and the class members, filed a declaratory judgment action in the Circuit Court of Cook County seeking a declaration of coverage.  BCS and Margulis filed cross-motions for summary judgment. The circuit court granted BCS’s motion and denied Margulis motion. Margulis appealed.

On appeal, Margulis argued that since Bradford’s advertising calls sought to induce the recipients to use its specialized services as an insurance agent, the policy afforded coverage.  Margulis reasoned that it did not take much effort to conclude that the resulting injuries arose out of Bradford’s business. The Appellate Court was not convinced, finding instead that the alleged negligent conduct, i.e., the transmission of unsolicited phone calls, did not arise out of Bradford’s rendering services for others as an insurance agent. Notably, the Appellate Court found compelling that the recipients of automated telephone calls were not insurance clients of Bradford, and in turn, Bradford could not have been rendering services as a licensed insurance agent, general agent or broker.