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(Article from Insurance Law Alert, June 2016)

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An Illinois appellate court ruled that Indiana and Illinois law differed regarding the notice required when an exclusion is added to an insurance policy at the time of renewal, and that the law of Indiana governed the dispute.  Cincinnati Ins. Co. v. Chapman, 2016 WL 2986193 (Ill. App. 1^st Div. May 23, 2016).

In 2008, Chapman filed a class action suit against C.T. Phoenix alleging violations of the Telephone Consumer Protection Act.  Cincinnati, Phoenix’s general liability insurer, denied coverage based on an exclusion barring coverage for TCPA violations.  The exclusion had been added to the policy when it was renewed in 2006.  In ensuing litigation, the parties disputed whether Indiana or Illinois law should govern the dispute.  An Illinois trial court determined that the law of the forum state (Illinois) applied after finding that there was no conflict between the two states’ laws.  Under Illinois law, an insurer must provide 30 days advance notice of a new exclusion in a renewal policy.  Because such notice was not provided here, the court ruled that the TCPA exclusion was not valid.  The appellate court reversed.

The appellate court ruled that an actual conflict existed between Illinois and Indiana as to an insurer’s duty to provide notice of a new exclusion in a renewal policy.  Illinois law requires an insurer to provide 30 days advance notice, whereas Indiana does not.  Although there was no Indiana statutory law relating to such notice requirements in effect in 2006 (an applicable law became effective several months after the policy was renewed), the court ruled the existence of an Indiana appellate decision, which did not require advance notice, was sufficient to establish an actual conflict.  Having concluded that a conflict of law existed, the court addressed which state’s law should govern the dispute.  Noting that the policyholder was an Indiana corporation and that the only connection to Illinois was that a fax was allegedly sent to an Illinois resident, the court ruled that Indiana law governed the insurance dispute.  Consequently, because no advance notice was required under Indiana law, the court ruled that Cincinnati’s TCPA exclusion was valid.