### SECOND DIVISION DECEMBER 21, 2010 No. 1-09- 1634 SANTA’ S BEST CRAFT, L.L.C., a Delaware Li mi ted ) Appe al fro m the Liabi li ty Com pany; SANTA ’S BEST, an Ill in ois Gen eral ) Ci

rcu i t Cou rt of Partnershi p; an d H.S. CRAFT MA

NUFACTURING ) Co o k C o un t y. COM PANY , a Ta iwanes e Co rp or at ion, ) ) Plai ntif fs-Appel lan ts, ) ) v. ) No. 04 CH 01885 ) ZURICH A

MERICAN INSURA

NCE COMPANY, ) a Ne w Yo rk Co rp or at ion, ) ) Defe ndan t and Thi rd-Part y Pl

ai ntif f-A ppelle e ) ) Ho no r ab le ( S t . P au l Fir e a nd Ma r ine I ns ur an ce Co mp an y, ) Richar d J. Siebel and ) Stuart Pal

mer, Thi rd-Party Def endan t). ) Judges Presi din g. JUS TI CE CON NOR S d elivered t he judg ment o f the co ur t , w ith o pinion. Pr esiding J ust ice Cu nningham and J ust ice Kar nezis co ncur in the ju dgment and o pinion. OPINION Thi s c as e a

ri se s ou t of an i ns ura nc e c ove rag e di spute . A f

ter b ei ng sued by a c om pe ti tor for various forms of i

ntellectual pro pert y i

nf ringem ent and decept iv

e trad e pract ices, plain

tiff s, Santa’s Best Craft, L.L.C., Santa’s Best, and H.S. Craft Manuf acturing C ompan

y, tendered defen se of the l awsui t t o defenda

nt Zuric h A me rican Insuranc e Compan

y un der two in

surance pol i ci esi ss ue d by Zu rich . Due to a

con f li ct of i nte res t, Zu rich agree d to re i

m bu rs e p l ai nti f f s f or expenses i

ncurred by thei

r independen

t legal counsel

in defendi ng the lawsui

t. Nevertheless, plaint iff s filed the insta nt lawsu it, ult imately alleging t hat Zur ich brea ched t he insur ance po licies by1-09- 1634

2



### failing t o pr o vide a c o mplet e d efe nse o f t he u nde rlying law su itand failing t o re imbur se pla int iffs for t he co st of se t t ling the unde rlying lawsuit , a nd alleging t hat suc h co nduc t was vexat iou s and
unr eas ona ble. T hro ugh a ser ies o f par t ial summary judgment mot ions filed by t he pa rt ies, t he ci rcui t court gran

ted sum mary j udgm en t in Zuri ch ’sf avor on al l i ssues. Plai ntif f s n ow appe al

f rom th e ci rcui t court’s orde

rs, con tend i ng th at: (1) Z urich ’sf ail ure to i m med i ate l y re i m b ur se pl ai n ti f f s f or def ense ex pen se s i n cu rre d w as a b re ach of th e d uty to defend ; (2 ) Zu rich w as o bligat ed t o r eimburse plaint iff s for t he amo unt of t he se t t lement in t he underl yi ng l awsui t; (3) Zurich

was obl iga ted to reim

burse pl ai ntif fs for the cost of defen

din g a third party pursuant to a li cense agreemen

t; and (4) plaintiff

s were entitled to prejudgmen t interest
o n d efe nse ex pe nse s o we d. Fo rt he fo llo win g r ea so ns, we affir m t he jud gme nt o f t he cir cu it
cou rt. I. BACKG ROUND Plai ntif fs are ma nuf acturers and wholesalers of seas onal product s, specifi

cally , Chri stmas lights. As a w holes aler, plaint iff s sell t heir Chr istmas lights d irect ly to re t ailers, who t hen se ll the li gh ts to cus tomers

i n a reta i l store . There

are approx i mate l y 75 to 1 00 r

etai l ers to whom pla in tif fs would potential

ly sell thei r product s. Plai

ntif fs do not produce mai

le rs, fl ie rs, or internet ad s t o pr o mo t e t he ir p r o du ct s. Ra t he r , pla int iffs a ndt he ir c o mpe t it o r s inv it e r et aile r s t o t he ir
r es pe ct ive sho wr o o ms a pp r o ximat ely 1 8 mo nt hs b efo r e t he Ch r ist mas se as o n in w hic h t he ir products wou l d a pp ea r on th e reta i l er s’ sto resh

el v es . Th e reta i l er s m ake i n di vi dual appoi n tm en ts to vi si t t he sh owro oms. Duri

ng these appoi

ntmen ts, t hey view prot ot ype s of the products that pla in tif fs and thei r competitors in

tend to pr oduce for the next Ch ristm as season a

nd the packages1-09- 1634

3



### in whi ch they wil l b e sold. Occas iona

ll y, sa le s staff ma ke presentations to each retaile r about new pr od uct s in the sho wr oo ms. T he r et ailers d o no t pur chas e any o f the Christ mas lights dur ing these vis its to the showro om but or der pro ducts later as the next Christmas season appro aches. In the f all of 2001, plai

ntif fs produced a brand of C

hri stmas l igh ts call ed “Stay On,” whi ch
wo uld re main lit eve n if o ne o f t he b ulbs o n t he s t ra nd b ur ned o ut o r w as re mo ved . P laint iffs devel oped “Stay On

” ligh ts in conj unction w

ith Ge neral Electric Compan

y. Pursuan

t t o t hat coll aboration, plai

ntif fs entered in

to a lic ense agree

me nt with Monogram Li

censi ng, Inc., under Gene ra l Elect ric’s aut hor ity, t o u se t ra demar ks o wned by Gener al Elect ric o n its “S t ay On” pack agi ng. S ection 12.0 1 of

that l i cense a greem en t provi ded that plai

ntif f s, as “Li censee ,” “s ha ll def end, i nde m ni f y and hol d ha rm l ess [Monogram

] and [Gen

eral El ectric], and their *** representat iv es *** from and agai

nst any an

d all clai ms, l iabil ities , loss es, co st s, d amage s and expe nses ( including r eas ona ble at t or neys’ fees ) a rising out of or i n con n ecti on wi th (a) L i cen se e’ s a

cts or om i ss i on s i n con n ecti on wi th this Agreem ent, the Li censed Marks and/or the Licensed Products in cl udin g, but
no t limit ed t o ** * a ny in fr ing eme nt o f any r ig ht s ( inc lu di ng int elle ct ua l p r o pe rt y) of any one i n conn ection wi th the ma nuf acture, advertisi

ng, promotion, sale, posse ssi on or us e of

Li censed Products.” Section 12.0 3 further pro vided that plai ntif fs “ shal l obtain and m ain tain at its own expense
com m erci al gen eral li ab i li ty i n su ra n ce i n cl udi n g b road f orm cov erag e f or * ** ad v er ti se r’ s l i ab i li ty insu ra nce , a s s et fo rt h in Ap pe ndix I a t t ac hed her et o .” App end ix I s pe cifica lly req uir ed pla int iffs to “n am [e] [General

Electric] and [Monogram] *** as addi tional in sureds” on those i

nsuran ce1-09- 1634

4



### polici es and to provide Monogram with c ertif

ic ates of i nsuran ce lis ting them as addi tional in sureds “as p ro of o f such insu ra nce. ” Plaint iff s’ failure t o p ro vide t he r equ ired insura nce w ou ld be considered a m

aterial breach of the contract, but wo uld n ot aff ect plai ntif fs ’ obl iga tions un der section 12.01. In late 2002, plain

tiff s and Monogram were named as def endants in a lawsui t fil ed by JLJ, Inc., an d In li ten , L. L.C ., i

n th e U ni ted State s D i stri

ct C ourt f or the Sou

the rn Distri ct of Oh i o, wh i ch wa s s ub se quen tl y am en de d ( th e u n derl y i n g l aw su i t). J LJ , In c. v . Sa n ta’ s B est Craf

t, L.L.C., No. C-3- 02-00513 (S.D. Ohio). The underl yi ng l awsui t alleged that JLJ and In

li ten
ma nuf actured and sold Ch

ristm as l igh ts under the nam

e “Stay Li t,” which co mpeted with pla inti f f s’ “S tayOn” l ig hts . JLJ a nd I nlit en a lle ged t

hat pla inti f f s copi ed the ir

pac ka gi ng a

nd slo gans and pu t th em on the pro du cts an d p ackage s th at pl aint iffs disp layed in th eir sh ow roo m. JLJ and Inliten alleged that plain tiff s traded on their name and goo d will, wh ich resulte d in lo st prof its . Cons equent ly , JLJ a nd I nlit en a lle ged e ig ht s tate a nd f eder al causes of

ac tion : (1) trademark infringemen t; (2) f alse designatio n of origin and trade dress infringeme nt; (3) false adver tising ; ( 4) tr ademar

k dilution; (5) decepti ve tr ade pra ctices; (6) pie rcing t he veil of

limited liab ilit y; (7) unjus t en rich me nt; an d (8 ) civi l co nsp iracy. JLJ and Inlite n so ugh t in jun ctiv e rel ief as
we ll as m on etary dam ages. Plaint iff s had ac qu ired tw o in suranc e po licie s from Zu rich for th e pe riod cove ring Jan uary 1, 2001 to Januar

y 1, 2002. The fir st policy , a commercial g enerallia bility (CGL) policy , prov ided
co verage for, amo ng o the r thi ngs , “Perso nal an d Ad verti sin g Inju ry Liab ilit y” up to $ 1 m illi on . T he sec on d p oli cy was a “C ust om Co ver Po licy” that pro vid ed , amo ng o the r thi ngs , “Spe cial1-09- 1634

5

Liabili ty Occurrence” cove rag e f or adv ertis ing injuri es (umbrell a policy ). Pla intif

fs tendered defense of the underlying la wsuit to Zurich un der the CGL policy. I nitially , Zurich denied that it had a du ty to d efen d p lain tiffs bec ause the alleg ed inj urie s oc cu rred ou tsid e th e p oli cy pe riod
. Af ter pla inti f f s a sk ed Zur ich t o re consi der it s deni al , Zuri ch a gr eed t o prov ide pl ai ntif f s wi th a defense subject to a

f ull res erva

tion of right s. In a

May 3, 2003, letter

to plai ntif

fs , Zuri ch add itio nall y stated that “[b]e cau se a co nflic t of in tere st ex ist[e d] b etw een [plai nti ffs] and Z uric h,” plaintiffs were permitted to select th eir own legal coun sel and Zu rich agreed to p ay f or those “re asonable and necessa ry att orneys ’ f

ees and other

defens e costs. ” Zurich retained a law f

irm to review defense expense invoices submitted by plaintif fs to dete rmi ne whet

her the c harges wer e r ea sona ble a nd whether

they perta ined t o claims c overed by the i nsur anc e poli cy . Upon re cei pt of ea ch inv oice , Zuri ch r eimbur sed pl ai ntif f s f or half of the amount of t

he invoice and a greed to reimburse the r emaining a mount, less a

ny r ecommend ed adjustments, af

ter i ts leg al consult ants completed their revi ew. I

n total, plainti ff

s submitted $1 ,322 ,063 in leg al fees incu rred th roug h De cem ber 2 00 3 on a rollin g basis. Alth ou gh Z urich ’s legal consultants determined that only $342,92 2 of those fees were reasonable or pertinent to claim s co vere d b y the i nsu ranc e p oli cy, Zu rich had at that tim e rei mb urse d p lain tiffs $6 50 ,06 1. On Fe bruary 2, 2004 , plaintiff s filed the instant lawsu it against Zurich, seekin g a declaration that Zurich had breached its duty to def end the u nderlying lawsuit by failing to “promptly

and f ully ” r eimbur se t

hem the enti re amount

of the e xpens es i ncur

red . I n thei r s econd
amen ded compl ai nt, pla inti f f s dr opped the dec lara

tor yjudg ment c ount a

nd pur sued reli ef

bas ed on1-09- 1634

6

a breach of contr act t

heory. Specif

ically, plainti ff

s al leged that Zurich breached the insura nce
co nt rac t b y “f aili ng to f

ully , promptly

and completely

reimburse [plainti ff

s’] defens e expenses
as they wer e inc urred, f

ai ling to proper ly

prov ide [pla inti f

f s’ ] de f ense in the [und erlying] lawsuit, hinde ring and inte rfering in the defense o f the [underlying] lawsui t, f ai ling to s ett le t

he [ under ly ing ] l aws uit within pol icy li mits , [ and] f

ai ling to reimburse the rea sonable cost of a rea sonable set

tlement.” Plainti f f s a lso included a

sepa ra te c la im f

or reli ef f rom Zur ich’ s a lle gedl yunre as onabl e and
vex at ious conduct

purs uant to s ect ion 155 o f

the Illi nois I nsur anc e Code ( Code) (215 I LCS 5/15 5 (We st 2 00 4)). Shortly therea f ter , Zuri ch f

ile d a t hir d-pa rt ycomplaint ag ai nstSt. Pa ul Fi re and Mari ne I nsur anc e Companysee ki ng a decl arat ory

judg ment a s t o St. Pa

ul’ s obl ig at ions in the underly ing laws uit and see kin g co ntri bu tio n. Z uric h all ege d th at St. Pau l had issu ed a CG L p oli cy and an umbrella policy

to plai ntif

fs f or the peri od covering J anuar y 1, 2002, to Janua

ry 1, 2003. Zuric h al so a lle ged t

hat the S t. Pa

ul pol ici es provi ded cov erage f or t he inj uri es alle ged i n the under ly ing complaint. Plai ntif

fs f iled a s epara

te declarator

y j udgment action a gai nst St. Paul i n the United Sta tes Dis tr ict

Court f or t he Nor ther n Dis tr ict

of I lli nois see ki ng a

decl arat ion of

cove ra ge f

or t he injuri es alle ged i n the under ly ing la wsui t. Sa

nta ’s Best

Cra f t, L.L .C. v. St. Pa

ul Fi re & Mari ne Insuranc e Co ., No. 04 -C-1 34 2 (N.D . Ill. 2004 ). Plaintiff s then filed a “M otion for Par tial Summ ary

Judgm ent Qu antify ing Defense Expen ses ” inc urred by

pla inti f f s i n the under ly ing la

wsui t. On the agree ment of the p ar tie s, the1-09- 1634

1 Al thoug h St. Pa

ul wa s i n the unusual pos iti on of being a t hir d par ty in this li tig at ion, but unable to as sert policy def enses because of t

he parallel l itiga

tion proceeding on its defens e duties in f eder al cour

t, St. Pa ul a gr eed t o be bound b ythe c ir cuit cour t’ s det ermi nat ion of

the a mount of fees o we d. 7 circuit cour t conv ert ed plainti f

f s’ moti on int o a p eti tion f or a ttor ney f ees . The court conducte d a three-day

evidentiary

hearing to determine wheth er the fees sought by plaintif fs were reasonable and w hat port ion of

the f ees wer e owed b yZuri ch. Zur ich f ile d a motion in limine at the s tart of the f ee petition hear

ing seeking to exclude any ev idence or testimony reg ardi ng def ense expenses paid by plainti ff s on behalf

of Monogram purs uant to it s license agreement because those f ees
wer e not rec overabl e under the i nsur anc e poli cie s. The cour t i nsi ste d on ev al uat ing the
rea sona blene ss of

the Monog ra

m def ense expe nses al ong wi th a ll other claimed e xpens es f

or purpos es of

the h eari ng, but agr eed t o conv ert Zuri ch’ s mot ion in limine int o a m oti on for parti al
summ ary judgm ent on the issue of whethe r Zurich w as obligated to pay Mon ogram’s defense costs. 1 Th e court ultimately determined that plaintif fs sought reimbu rsement of $4,076,397 .29 in fees an d c ost s in cu rred . How eve r, after de du ctin g cert ain i ne ligib le e xpe nse s for wh ich the re was ins uf f ici ent do cument at ion or tha t were beyond the scope of cove ra ge of

the i nsur anc e poli cy , t

he
co urt re du ced the amo un t of rec ove rable fees an d c ost s to $3 ,61 1,8 41 in “re ason able ” exp en ses. The court f

urt her dete rmi ned th at

Zuri ch ha d al readyre imbur sed pl ai ntif f s $790, 016 and St . P aul had reimbursed plaintiff s $1,285,690 .80, leavi ng a bala nce of $1,536,134 .20 in fees owed to pla inti f f s. I t ent ere d judg ment aga ins t Zurich i n tha t a mount. Howev er, the c ourt notedtha

t the Mon ogra m defense ex

penses repr esented $1,265,116.30 of that balance. Thus, the court s tayed1-09- 1634

8

enfor cement of the j udgment aga inst Zuric h with respect to the Monogram defens e expenses pending the outcome of Zurich’ s motion for part ial summary

judgment on the issue, but ordered Zurich to pay the remain ing $2 71,01 7.90 w ithou t delay. The co urt further denie d plaintiffs’ request f or prejudgment i nterest on the amount

owed, st at ing tha

t the inv oice s were not “liquid ated amou nts on which prejud gmen t interests [ sic ] wo uld accru e.” With respect t o the Mon ogra m defense ex

penses, t he court la

ter deter mined that Zurich had no duty to de fend M ono gram und er the C GL p olicy and, therefore, no d uty to reimb urse plainti ff s f or the cost of

Mon ogra

m’s def ense. Pl ainti ff

s had a rgued that the CGL policy provided
cove ra ge f

or c ontr ac t i ndemnit ees tha t pl ai ntif f s were obli gated t o def

end vis-a-vis an “ insured contrac t. ” Thus, they

argued, the l ice nse agr eement ga ve r ise to pl ai ntif

f s’ obli gationto de f

end Monogra m, a nd in t urn, Zuri ch wa s obl ig at ed to pay Monogr am’ s def

ense cost s. Howev er, the
court r uled t hat the CGL poli cy

spec if ica lly exc luded cove ra ge f

or pe rs onaland adv ertisi ng injuri es “ f

or wh ich t

he ins ure d has as sumed l ia bili ty in a contrac t or

agree ment. ” A ddit iona lly , t he
co urt re co gni zed that the re was an ex cep tio n to the excl usi on if plain tiffs had an ind ep en de nt l egal ob ligati on to in de mn ify Mo no gram b ased on the parti es’ re latio nsh ip ab sen t th e lic en se agre em en t. How ever, the cou rt determin ed that in this case, absent th e license agreement, based on th e parties’ relationship, Mono gram would have an obligation to indem nify plaintif fs. Thu s, the exception did
no t ap pl y. The cou rt also determined tha t, unlike the CGL policy, the language of the umbrella

policy did no t provide a duty to def end a contract indemn itee. I t then determine d that Zurich had no d uty to in dem nify plainti ff

s for Mo no gram’s de fense ex pen ses un der th e um brell a poli cy. Th e co urt1-09- 1634

9

det ermi ned that alth ou gh th e um brell a poli cy provid ed c overage for “sums [p laintiffs] beco me [ ] leg al ly obli gated t o pay

* * * under

an insur ed cont

ra ct, ” the ac tua l i njur

yal leg ed in the un der ly ing lawsuit was not an “advertising injury ” covered by the policy. The court con strued the policy to requir e tha

t a n “adver tis ing inj ury” must

arise out of

an “ adv ertise ment, ” and tha t di spl aying the offend ing pro du cts an d p ackagi ng i n p lain tiffs’ sho wro om was n ot an “adve rtise me nt.” After set tlin g th e u nd erlyin g laws uit for $3 .5 m illi on , plain tiffs filed a “M oti on for Partial Summ ary

Judgmen t On Zurich’s Settlement R eimbu rsement Obligations.” As par t of their motion , plaintif

fs agai n argued that Zurich was estopped from raising any coverage defenses with respect t o its duty

to reimburs e plainti ff

s f or the amount of the settlement because Zurich breac hed its duty to def

end by fa iling to promptly and fully reimburse defense costs. The court did n ot rule
on the spe cific q ue stio n o f whe the r Zu rich bre ach ed its d uty to de fend . Rath er, it c on clu de d th at “[e ]ven if

Zurich [ha d] brea ched its duty to def end, the est oppel doctrine applies only t o policy defenses ( e. g. late notice ),” and, therefore, Zurich w as not esto ppe d from raising coverage de fense s. Zu rich the n file d a m oti on for parti al su mm ary jud gme nt o n th e iss ue of wh eth er it w as ob ligated to in dem nify plainti ff s for the co st of the settle me nt. Zu rich again argued , and th e co urt agai n found, that plaintif fs’ display of

the allegedly infringing “Stay On” lights and packaging in the s howro om was not a n “adver tis ement” under

eit her the CGL poli cy

or t he umbr ell a pol icy

and
was not a

n “adver tis ing inj ury” a s def

ined b ythe p olic ies . Theref ore , t he a lle ged i njuries did not fall within the sco pe of coverage and Zurich had no obligation to ind emn ify plaintiffs f

or the co st of th e se ttle me nt.1-09- 1634

10

B ec au se th e c irc u it co u rt d et er m in ed th at Z u ric h ha d no ob li gat io n to in d em n ify p lai n ti ffs for t he settlement or M onogram’s defense f ees, it dismissed the third-part y complaint aga inst St. Paul. Addition ally, because Zurich did n ot act un reasonably in reimb ursing plain tiff s’ defense expe nses , there w as no b asis on whi ch to pursu e the vexatio us co nd uct claim . After all issues we re fina lly disposed of in the circuit court, plaintif fs fil ed this appeal. II. AN AL YS IS Plaintif fs appeal f

rom several orders of the circuit court granting summary judgment in f av or of Zuric h. We r evie w de novo the circ uit co urt’s ord ers gran tin g sum mary ju dgm en t. Salerno v. I

nnovative Surveillance Technology, Inc. , 40 2 Il l. Ap p. 3d 49 0, 49 6 ( 20 10 ). U lti m ate ly,
we mu st d ete rmi ne wh eth er th e ci rcu it co urt re ach ed the pro pe r resu lt. Saler no , 40 2 Ill. Ap p. 3 d at 496. There f

ore , w e need

not de f er to the ci rcu it court’ s r ea soni ng a nd may ins tea d af

f ir m the jud gme nt o n an y basis s up po rted by th e rec ord
. Saler no , 40 2 I ll. App. 3d at 496. A. Z u ric h ’s D u ty t o De fen d Pl ain ti ffs In their f irst a rgument on app eal, plaintiff s claim that Zurich’s f

ailure to pay

all of their def ense expe nses in f

ull immedi at ely

upon r eceipt wa s a

bre ac h of

the duty to de f end and, the refore , Zu rich was e sto pp ed from rai sin g any co verage de fense s. Th ey cite to selecte d language f ro m Emp loyers Insu ranc e of Wa usau v. Ehlco Liquid ating Trust , 18 6 I ll. 2d 127 ( 1999), and Mu rphy v. Urso , 88 I ll
. 2d 444 (1 981) , in s uppor t of the ir cl ai m. I t i s wel l s ett led t

hat when a n ins ure d tend ers def

ense of a c la im to it s i nsur er, and the insurer be lieves the c laim is not c overed b y the insurance policy, the in surer canno t “simply refuse to defend the i nsured.” Ehlco , 18 6 I ll. 2d at 150. Rat her , i t mus t ei ther : (1) def end th e underly ing1-09- 1634

11

suit under a

reser vat ion of rights; or (2) seek a declar ator

y j udgment that no cover age ex ists under the term s of th e p oli cy. Ehlco , 186 Ill. 2d at 150 . Where th e insurer fails to take either of those two actions and is later f ound to have wrongfully denied co verag e, it has breached its duty to de fend
. Ehlco , 186 I ll. 2d at 150-51. A s a consequence of that breach, the insurer is est opped from later

ass ertingany

policy defenses to coverage, e ven if those def

enses may

have been
suc ces sful in the abse nc e o f the b reach
. Ehlco , 186 Ill. 2d at 15 1-52 . It is an extraordin ary
rem ed y, but warran ted in li ght of the fact that the ins ure r’s du ty to d efen d is “so fun dam en tal an obligat ion that a

breach of

that duty

constitutes a r epudiation of the contra ct.” Ehlco , 18 6 Ill. 2 d at 151. Howev er, wher e the re is a c onf lic t of int ere st betwe en the ins ure r a nd the ins ure d, a

nd the ins ure r c annot

f ully re pre sent

the i nterest s of

the i nsur ed, the i nsur er may not unde rt ak e the de fense of the ins ure d it self. Ehlco , 18 6 I ll. 2d at 156. Nev ert hele ss , t he ins ure r remai ns bound under the i nsur anc e poli cy

to provi de the ins ure d wit h a d ef ense and, theref

ore , mus t per

mit t he ins ure d to be rep rese nte d b y cou nse l of its o wn ch oo sin g. Ma rylan d Ca sualty Co. v. Pepp ers , 64 Ill. 2 d 1 87 , 19 8 (1 97 6); Ehlco , 186 I ll. 2d at 156. Under t hose circumsta

nces, t he insurer

then “must r eimburse [t

he insured] f

or the r easonable cost of defending t

he action. ” Peppe rs , 64 I ll. 2d at 199. There is no dis pute i n thi s ca se t hat Zuri ch a gr eed t o def

end pl ai ntif

f s i n the under ly ing action u nde r a reserva

tion o f rights and th at because o f a conflict of interest, it agreed to reim burse p lai n ti ffs fo r “re aso n ab le an d ne ce ss ary at to rn eys ’ fee s an d ot h er de fen se co st s.” R ath er , p lai n ti ffs
o bje ct to th e m an n er in wh ic h Zu ric h re im b u rse d th ei r d efe n se ex p en se s. A lt h o u gh pl ain ti ffs1-09- 1634

12

recogniz e that they are only entitled to reimb urseme nt for “necessary and reasonable” d efense fees, the y argue t hat “w hate ver th e in sure d d oe s to de fend itse lf is treat ed as ne ces sary and reaso nab le.” Thus, they

argue, Zuri ch’ s r evi ew of the rea sona

blene ss of

the e xpens es s ubmitt ed by pla inti f f s f or reimbursement a

mounts to “second-gues sing what is ‘ necessar

y a nd reas onable’ f

or the def

ense” of th e u nd erlyin g acti on and co nst itu tes a b reach of the du ty to d efen d. In es sence, plaintif

fs ar e asking this court to deter mine that the def

ense expenses s ubmitted on behalf of a n insured’s independent legal counsel ar e per se rea sona ble. We decl ine t o do so, espe cia lly

in l ig ht of

the c ir cuit

cour t’ s det ermi nat ion that

cer ta in def ense expe nses submi tte d by plain tiffs were un reason able. After plain tiffs raised th is issu e in th e circu it co urt in a summ ary judgment motion, the court conver ted their motion into a petiti on for attor ney f ees and conducted a li ne-by- line rev iew of the def ense expenses. The court held a thr ee-day heari ng, considered several witnesses’ testimony, a nd examined volumes of docum ents submitted by both parties a s to the rea sona

blene ss of

the f ees . A ltho ugh t

he cour t det ermi ned th at

Zuri ch under

pai d pla inti f

f s by app roxi mat ely $2 71 ,00 0, it al so d ete rmi ne d th at pl aint iffs overb ille d Z uric h b y nearly $ 46 5,0 00 , a finding that plain tiff

s do n ot con test on ap peal. Th us, Zurich had no obligation to reimb urse plainti ff s f or those def

ense expenses t

hat the court

f ound to be unjustifi ed and, therefore,
unreasona

ble. See Peppe rs , 64 I ll. 2d at 199. That a portion of

plainti ff s’ own def

ense expenses
wa s d ee m ed un re aso n ab le ne ce ss ari ly u n d er m in es an y arg u m en t t h ey c o u ld m ake in su p p o rt o f a gen eral ru le th at an in sure d’s d efen se e xpe nse s are reas on able as a matt er o f law. Nor d oes pl ai ntif

f s’ posi tionf

ind s upport

in Ehlco or Murphy . A ltho ugh t he cour t i n Ehlco conclud ed that the insurer, Wausau, wa s estopped from asserting policy defenses because it1-09- 1634

13

“f ai l[ ed] to r eimbur se [ the i nsur ed] f or t he cos ts of

it s def ense as incur

red ,” the c ourt

was not commenti ng on t

he amount of

ti me between t

he ins ure d’s submi ss ion of expe nses to Wa

usa u and its su bse qu en t rec eip t of reim bu rsem en t. Ehlco , 186 Ill. 2d at 156. Rather, Wausau “simply ref use[d] t o defend the insured.” Ehlco , 18 6 Ill. 2 d at 1 50 . Wau sau d id n ot b elie ve th ere w as
cove ra ge un der

the p olic y , bu t, contrar yto l ong- sta

ndingla w, did not

def end under

a rese rv at ion of right s and did not f

ile a declar ator

y j udgment action until a ft er the underly ing la wsuit had been sett led
. Ehlco , 18 6 I ll. 2d at 154. I n f ac t, it“di d nothi ng ot

her tha n re quest inf orma tion ” f rom t he ins ure d for m ore than six m on ths , wh en the ins ure d n oti fied W ausau of a sett lem en t offer. Ehlco , 186 Ill. 2d at 134. I

n response, Wausau, which had stil l not agreed to def end the insured, off

ered to “participate” in the un derlying action b y pay ing a mere 9% of the settlem ent and defense
amo un ts, wh ich the ins ure d re fused
. Ehlco , 18 6 I ll. 2d at 134. Thus, in the dec lara tor yjudg ment
ac tion , Wa

usa u wa s f ound to h av e br ea ched i ts duty to de f end and wa s es topped f

rom a ss erting po licy d efen ses. Ehlco , 18 6 Ill. 2 d at 1 54 -55 . On ap pe al, W ausau assert ed a post hoc argument that its b reach sho uld be excu sed be cau se it had a con flict o f inte rest w ith the ins ure d. Ehlco , 18 6 I ll. 2d at 156- 57. The cour t not ed tha

t “ eve n in t

he unl ik ely

eve nt” t hat there wa s a

conf lic t of inte res t, est oppel appl ied be cause Wa usa u aba ndoned i ts obli gation s unde r t he ins ura nce pol icy

by do ing and payin g no thi ng o n b eh alf of its in sure d. Ehlco , 18 6 I ll. 2d at 154. On the contrar

y , Zuri ch sa

tis f ied i ts duty

to de f end pl ai ntif

f s, despi te i ts beli ef

tha t the in su ran ce po li cy d id no t p ro vi d e c o ve rag e fo r th e c lai m ass er te d . It ag re ed to de fen d pl ain ti ffs under a reserva

tion of rights, agr eed to permit plaintiff s to choose the ir own legal counsel to defend th em in the un derlying action, and agreed to reimb urse plaintiffs f or reasonable d efense1-09- 1634

14

expenses. Moreover, Zurich imm ediately pa id half the amoun t of the invoice submitted wh ile it
rev iewe d the rea sona

blene ss of

the c harges . Z uri ch didnot wi thhol d pay ment a s a

way of under mining the d ef ense stra teg y , a s pl ai ntif

f s s ugg est . Ra

ther , Zuri ch obj ect ed to charg es f or which there was insu ff

icient d ocu men tation and to charges that we nt beyon d the sc ope of coverage for th e u nd erlyin g laws uit , as the circ uit co urt u ltim ately fou nd
. Pl ain ti ffs si m il arl y ov er re ac h in th ei r re ad in g o f Murphy . Th e co urt’s co mm en t on an ins ure r’s ob ligati on to u nd erw rite t he co st o f “whate ver d efen se [th e in sure d] c ho se to make ” was made in the context of

resolv ing the ethical problems that arise when the insur er a nd the insured have com petin g interests, rather than a com men t on th e inhe rent prop riety of those defense expenses. See Murphy , 88 I ll. 2d at 454.

B. Zuri ch’ s Dut

yto “ Reimbur se” the S ett lement Amount Plainti f f s next a rgue tha t they are ent itl ed to “r eimbur semen t” f or t he amount of

the settle ment paid i n the under ly ing ca se. Al thoug h pla inti f f s f ra me the ir argument

in t erms of Zurich’s breach of

its duty to settl e, tha

t obliga tion is not implica

ted here. See Haddic k v. Valor Insurance , 198 Ill. 2d 40 9, 414 -15 (20 01) (an insu rer’s duty to settle derives from its “exclu sive
co nt rol ove r set tle me nt ne go tiat io ns and de fens e o f liti gati on ”); Cramer v. Ins uranceExchange Agency , 17 4 Ill. 2 d 5 13 , 52 5 (1 99 6) (th e “du ty to se ttle ” arise s on ly wh en the ins ure d h as relin qu ish ed de fense of the un de rlying sui t to the ins ure r). Rath er, any o bli gatio n to rep ay pl ain tiffs fo r th e c os t o f th e s et tle m en t ari se s o ut of Z ur ic h’ s d ut y to in de m ni fy. Once the in sured has accrued liability in the und erly ing lawsuit, t he duty to indem nify

is im pli cate d. Certain Unde rw rit ers at L loyd’

s, London v . Bo eing Co. , 38 5 I ll. App. 3d 23, 411-09- 1634

15

(200 8), citing Outboar

d MarineCorp. v. Libe rty Mutual I

nsurance Co. , 15 4 I ll. 2d 90, 127 (199 2). Whe re, as here, the insured settles the u nde rlying lawsuit prior to verdic t, it must de mo nst rate th at it se ttle d “an oth erw ise c ove red los s in ‘reaso nab le an tici pati on of pe rson al liab ilit y’ ” to re co ver th e se ttle me nt. Federal I nsurance Co. v. Binney & Smith, I nc. , 39 3 I ll. App. 3d 2 77, 28 2 (200 9), quo ting United Sta tes Gyps um Co. v. Admir al I nsurance Co. , 26 8 I ll. App. 3d 598, 625 (1994). That is, an insured is only entitled to indem nity f or losses that a ctually fall wit hin the term s of th e in suran ce p oli cy. Binney & Smith , 39 3 Ill . App . 3d at 2 90 ; cf. Lorenzo v. Capitol Inde mnit

y Corp. , 401 I ll. App. 3d 616, 619 (2010) (t he duty to def

end aris es if

the all eged losses potentially fall wit hin the term s of th e p oli cy). To dete rmin e wh eth er the claim ed lo ss was in fact covere d by th e po licy, we m ust c om pare the alleg atio ns i n th e u nd erlyin g laws uit to th e lan guage of the po licy it self. Binney & Smith , 39 3 I ll. App. 3d at 290. I n cons tr uing the p olic yla

ngua ge, our pri mar

yobjec tiv e is “t o as cer

ta in a nd give ef fec t to the intenti ons of t he parti es as expres sed by t he words of

the policy .” Central Il lino is Light

Co. v . H ome I nsurance Co. , 213 Ill. 2d 14 1, 153 (2004 ). We con strue the p olicy as a wh ole , givin g effect to every p rovi sio n. Central I llinois Ligh t , 21 3 I ll. 2d at 153. Where the words used in the pol icy are cl ear a

nd unambigu ous, we a f f ord t hem the ir

pla in, ordi nar

y , a nd po pu lar me anin g. Central I llinois Ligh t , 21 3 Ill. 2 d at 1 53
. Plainti f f s cl ai m that the CGL pol icy and the umbrell a pol icy ea ch pr ovi de cov erage f or t he infringemen t and deceptive trade practice cla ims alleged in the underlying lawsuit. We will
exam ine the langu age o f each p oli cy in t urn .1-09- 1634

16

Plainti f f s r ely on the f ollo wingla

ngua ge i n the CGL poli cy in s upport

of thei r c la im f

or
covera ge: “C OV ER AG E B PE R SO NA L A ND AD VE R T ISIN G IN JU R Y L IAB ILIT Y

1. I nsuring Ag ree ment

a. We will pay those sums that the insured beco mes legally obli gated t o pay

as damages beca

use of ‘pe rs onaland adv ertisi ng injury’ to whic h this in surance app lies.
*** SECTION V - DEFI

NI TIONS 1. ‘A dver

tis ement’ means a

noti ce that

is broadca st or pub lis hed to the genera l public or speci fi c mark et segments about y our goods, products or ser vices for the purpo se of attra cting cu stome rs and supp orters.
*** 14 . ‘Perso nal an d ad verti sin g in jury’ m ean s in

jury, in clu din g co nse qu en tial ‘bod ily injury’, arising out of one or more o f the following offenses:
*** f . The use of

anot her ’s adv ertisi ng i deain your ‘a dver tis ement’ ; or g. Infringin g up on ano the r’s co pyrigh t, trade dre ss o r slo gan in yo ur ‘ad verti sem en t’.”1-09- 1634

17

Un de r thi s po licy, Z uric h m ust pay dam ages o n p lain tiffs’ beh alf resul tin g from an “a dver tis ing inj ury” ca

used b ypla inti f

f s. The re lev ant

port ions of

the p olic ydef

ine a n “adver tis ing injury” as infringing upo n anoth er’s advertising idea, copyright, trade dress, or slogan in plaintiffs’ “a dverti sement.” The dis pute i n thi s ca se i nvol ves whether the alle ged i njuries caused b ypla inti f f s a ros e out of a n “advertis ement.” Plaintif fs acknowledge that they did not advertise to the general public when they

inv ite d 75 to 1 00 re ta ile rs to their showroom to v iew t

heir prot oty pe “ Sta yOn” prod uct s and p ackaging. R ather, th ey argue th at thei r disp lays were d irecte d at retaile rs, whic h are a “ specif ic mar ket segment” of the g eneralpublic under the policy ’s def inition of “a dverti sement.” However , t

hey provi de us wit

h no legal or other authority to suppor

t tha t claim. Never

theles s, we need not re ac h tha

t ques tion
. 

### Our research reveal s that no Ill in ois cas es hav

e y et determin

ed what constitutes an

“ ad v er ti se men t” a s def i n ed b y th e s pe ci f i c l an guag e i n thi s C GL pol i cy. In f act, f ew cou rts nationw ide have had occasi

on to in terpret this

policy term. Theref

ore, we analy

ze i t as a matter of f i rs t i m pre ss i on . 

### The CGL pol

ic y de fi nes an “adv ertisem ent” as “ a notice that is broadcast or published to the general public or specific mark et segments 

### ” a bou t the i ns ure d’ s g oodsor s erv

i ce s. I n a ddi ti on to establ is hi ng to whom the notice

was di rected, an in

sured m ust also establ

is h that the notice was “b roadcast o r publ

is hed.” The pol

ic y does n ot defi ne “ broadcast” or “publ

is hed”; therefore, we l ook to t he

dicti onary

to ascer tai n the words ’ pl

ai n, ordi na ry , and popul

ar m ean i ngs . Valley Forge Insurance Co. v. Swiders ki Electronics, I nc. , 22 3 Ill. 2 d 3 52 , 36 6 (2 00 6). T 

### he term1-09- 1634

18



### “b roadcast” means “to make wi del y kn own: dis sem

in ate or distribute widel

y or at random.” We bsters Th i rd New Intern ational Dicti onary

280 (1 981). To “

pub li sh” m

eans “ to declare publ ic ly : make

general ly known: di sclose, circul

ate.” Websters Thi

rd New International Dict ionar y 1837 (1 981 ). Thu s, u nder t he t er ms of t he CG L po licy, an “adve rt isement ” must be wide ly dis sem in ated to its i

ntended audi

ence, regardless of wh

ether the audi ence is the general publi c or a

sp ec i f i c m ark et s egmen t the reof . Th i s c om ports wi th ou r i nte rpreta ti on of “adv ertisi ng” i n gen eral, wh ic h contem pla tes the “ ‘wi

despread di stribution of promotional
ma terial to the publ

ic at large.’ ” Lexm ark I nter nati onal, Inc . v . T

rans portatio n Ins uranceCo. , 327 I ll. App. 3d 128, 138 

### (2001), quo ting International Insurance Co. v. Florists’ Mutual Insurance Co. , 20 1 Il

l . A pp. 3d 4 28, 433 (19 90) ; s eealso Playboy Enterprises , Inc. v. St. Paul Fire & Marine Insurance Co. , 769 F .2d 425 , 429 (7 th Ci r. 1985 ) (appl

y i ng I lli noi s law). Neve rt heless, dire ct ing t he no t ice t o a “spe cific marke t seg ment” of t he ge ner al public, as t he CG L p o licy p er mit s in t his c as e, do es no t o bvia t e t he r eq uir eme nt t ha t itmus t be wid ely dis sem in ated. Thus, regardless of whether retail

ers are a “s

peci fi c m arket segmen

t” of the general publ ic , as pla in tif fs argue, plai

ntif fs stil l m ust demonstrate that t hei

r “adve rtisem ent” was “b roadcast o r publ

is hed” to their audience. We f in d support for t hi s i

nterpretat ion i

n the case la w of the f ew other juri sdictions that have int er pr et ed t his spec ifi c po licy l angu age . S pec ifi

cally, in Rombe Corp. v. Allied Insurance Co. , w hich inv o lved no t ably similar fac t s, an ins ur ed ar gu ed t hat an a ss emble d g ro up o f a competi to r’s customers was

a “spec if ic ma rket segmen

t” to whom i

ts “adverti sem

ent” was di rected
. Rombe Corp. v. Allied Insurance Co. , 27 Ca l . Rptr. 3d 9 9, 106 ( Cal . Ct. Ap p. 2005 ).1-09- 1634

19



### Rel yi ng on the pl

ai n l anguage of

the poli cy , the Rombe court concl uded that regardless of

whether th e g rou p w as a “ sp ec i f i c m ar ket se gm en t,”th e p oli cy

l an guag e req ui re d th at a n y “ ad v er ti se men t” must have be en “pu blished o r br oa dca st ,” meaning t hat it w as d irect ed a t a “re latively larg e and dis parate audien

ce.” Rombe , 2 7 Ca l. Rp t r. 3d a t 106 . T hus, t he insur ed w as no t re lieved o f “the b urden of demon strati

n g th at i t wa s e n gage d i n re l ati v el y wi de diss em i n ati on of i ts a dver ti se men ts
even if the dis tribution was f

ocused on recipi

ents wi th particular characteris

tics or in terests.” Rombe , 2 7 Ca l. Rp t r. 3d a t 106 . I n t he abs ence of a ny wide disse minatio n of th e “adv ertis em en t,” the insured’ s conduct was merely “ solicit ation of business, ” which could not be considered adve rtisin g un de r the langu age o f the p oli cy. Rombe , 

### 27 Cal . Rptr. 3d at 101, 107 . See also 

### Continental Casualty Co. v. Consolidated Graphics , Inc. , 6 56 F . S upp . 2 d 65 0, 661 (S .D . T ex. 20 09 ) (c oncl

udi n g th at “[t ]he linchpin of

what consti tutes * ** ‘a dverti sing’ under a [ CGL] policy is that the a lle ged c onduct must be wi dely dis semi nat ed” 

### ). Furthermore, we f

ind the Rombe court’ s unde rl y ing poli cy ra tion al e f or t his int erp ret at ion per sua siv e. The holdi ng i n Rombe was a n extension of

the Calif

ornia S upreme Court’s ea rlier deci sio n in Ham eid v. Na tiona l Fire Insuran ce of Hartford , 71 P.3d 76 1 (C al. 20 03 ), in w hic h th at
cou rt adopted the app roach of the m ajority of cou rts, includin g Illinois, in defining “advertising” as “widesprea d promotional activiti es usual ly directed t o the public at l arg e.” Hameid , 71 P. 3d 766 , 767, citin g Flori

sts ’ Mutual , 201 I ll. App. 3d at 433. The Hameid court arrived at its concl usi on af

ter an e xha ust iv e anal y sis of

the d ef inition of “adver tis ing ,” compari ng the int erp retati on of the term amo ng c ou rts n atio nw ide . See , e. g. , Sele ct De sign, L td. v. Union Mutual Fi re I nsurance Co. , 67 4 A.2 d 7 98 (Vt . 19 96 ); Monu mental Life I nsurance Co. v. United States1-09- 1634

20

Fi deli ty & Guarant

y Co. , 61 7 A.2 d 1 16 3 (M d. C t. Sp ec . App . 19 93 ); Sole rs, Inc. v. Hartford Casual ty I

nsurance Co. , 14 6 F . Su pp . 2d 78 5 (E .D. V a. 20 01 ); Smart foods , I nc. v. Northbrook Propert y & Casual ty Co. , 61 8 N .E.2 d 1 36 5 (M ass. Ap p. C t. 1 99 3); Amer ican State s I nsurance Co. v. V orther ms , 5 S. W.3d 538 (Mo. Ct. App. 1999) ; and MGM, I nc. v. Libe rty

Mutual I

nsurance Co. , 839 P.2d 537 (Kan. Ct. App. 1992); but see New Ha mpsh ire Insura nce C o. v. Foxfire , Inc. , 820 F. Su pp . 48 9 (N .D. C al. 1 99 3); Sente x Sys tems, I

nc. v. Hart

ford Acci dent &Inde mnit y Co. , 882 F. Su pp . 93 0 (N .D. C al. 19 95 ). Hameid re

jec ted t he minor ity approac h set

f ort h in Foxfire and Sentex , among oth ers, which def

ined “ adv ertisi ng” o n a c as e-b y -ca se ba sis , t ak ing int o cons iderat ion t o whom the pro mo tio ns w ere d irec ted
. Hameid , 71 P. 3d at 769. The Hameid cour t r ea soned that i n li ght

of the pe rv as iv enes s of

st anda rd f orm CGL p olic ies , adopti ng s uch a “malle abl e” def

inition of adver tisingwould “eliminat e the cla rity and cert ainty” that insureds a nd insurers rely

on in policy int erp retati on and the reb y enc ou rage n eed less litig atio n. Hameid , 71 P.3 d at 76 9. M oreo ver, introd ucin g such u ncertainty into the inte rpretation o f insurance po licy terms disrup ts insurers’ abi lit yto “ compare los ses and ca lcul at e r at es a nd pre miums s o tha

t r at es remai n st abl e, ” to t he de trim en t of bo th p arties
. Hameid , 71 P. 3d at 769. Theref ore, l ike Rombe and Hameid , we
co nc lud e th at th e aud ien ce t o w ho m an “adve rtise me nt” is di rect ed is sec on dary to the fact that an “adve rtise me nt” mu st b e “bro adc ast o r pu bli she d.” 

### See also Consolidated Graphics , 656 F. Supp. 2d at 661. In thi s case, pl

ai ntif fs have not established that thei r notice was “

broadcast or published” and, theref

ore, cannot satisf

y the policy ’s def

in ition of “adv

ertisem ent.” Rather, their conduct1-09- 1634

21



### was aki n to personal sol

ic itation, wh

ic h i s not advertisi

ng. Agai n, we look t o t he si

mi la riti es between this case an

d Rombe . I n Rombe , a rep res en tati ve f or the i ns ure d i nv i ted a g roupof
customers to a m

eeti ng a nd r ecrui ted them to becom e cus tomers of his newl y f orme d com

pan y . Rombe , 2 7 Ca . Rpt r. 3d a t 101 . Like plaint iff s in this c ase , t he insur ed a rg ued t hat its mee t ing was an “advertis em

ent” under the sam

e defi ni tion at is sue here b ecause the ass em bled group constituted a “speci

fi c m arket segmen

t.” Rombe , 27 Ca

l . Rptr. 3d a

t 104. However, the c ourt fou nd t hat neithe r t he meet ing itse lf nor t he invitat ion t o d o bu siness w ith t he new co mpany co nst itu t ed a n “adve rt isement ” bec aus e t her e wa s no bro ad d isseminat ion o f inf or matio n, regardles s of wh

ether the group co uld b e considered a “spe ci fi c m arket segmen

t.” Rombe , 27 Cal . Rptr. 3d at 107. Rather, inv iti ng an assem bled group o f gues

ts to becom

e customers was an “i n-person f

orm of promotion [that] is not what is com

monl y thought of as

advertis in

g.” Rombe , 27 Ca l . Rptr. 3d a

t 107. Simila r ly, in t his c as e, pla int iffs inv it ed ea ch o f t he ir 7 5 t o 10 0 p o t en t ial c us t o mer s t o t he ir sho wr oo m to view t heir p ro duc t s. T he r et ailers mad e individual ap po intment s t o view t he product s and recei

ved personal

presentations about the product s di splay ed. Addi tional ly , as pla in tif fs adm it, they did n ot send out any

ma il ers or fl ie rs or conduct any Internet-base d adve rt ising to at t ra ct po t ent ial cust omer s. As in Rombe , we do n ot reg ard pl ai nti f f s’ “ i n-pers on form of promotion” as a b

roadcast o r publ

ic ation of the ty

pe required of

an “ advertis em

ent” under the terms of the C GL poli cy . See Rombe , 27 Cal. Rp tr . 3d at 107 ; Consolidated Graphics , 65 6 F. Su pp. 2d a t 661 -6 2 ( hold ing t hat dire ct co nt act wit h spe cific, pr ior cus t omer s wa s a so licitat ion, not a n a dvertisemen

t); se e al so First Bank &

Trust Co. v. New

Hampshire Insurance

Group , 4691-09- 1634

22



### A .2d 13 67 , 13 68 (N .H . 19 83 ) (h oldi n g th at th e “ ‘m ere ex pl an ati on ’ ” of a b an k’ s s er v i ce s to po t ent ial cust omer s in a pr ivate meet ing is not adve rt ising). Acco rd ingly, the claims in the
un de r lying law su it we r e n o t co ve r ed un de rt he CG L p o licy. We al so f

ind that there is no cov erage un der the umbrel la

poli cy . S ect ion B- 1 of the umbre lla poli cy prov ides cove ra ge f

or “ sums [pl ai ntif

f s] become leg al ly

obli gated t o pay

” so long as the “injury

or damage [is ] caused by a n ‘occurrence’ which results in ‘bodily injury, ’ ‘property dama ge, ’ ‘ per sona l i njur y ’ or ‘a dver tis ing inj ury .’ ” The r ele va nt def initions of

“adver tis ing injury ” include:

“Injury a rising out o f one or mo re of the following o ff enses:
*** 3. Misap prop riation of advertising ideas or styles of doin g busin ess. 4. Infrin gem en t of co pyrigh t, titl e o r slo gan.” Plain tiffs claim that the re is n o re qu irem en t th at an “ad verti sin g in jury” arise o ut o f an “a dver tis ement” in order

to be cov ered under

the umbre lla

policy as ther e was with t

he CGL po licy. T he refore , the y argue, c on stru ing the po licy st rictl y against Zu rich , we c ann ot d en y that
co verage exis ts u nd er th e u mb rella p oli cy. We dis agree . Again , we are ob ligate d to give t he langu age o f the p oli cy its p lain , ord inary, an d p op ular
me anin g to de term ine the parti es’ in ten t, and wh ere t he langu age is u nam big uo us, w e app ly it as writ ten . Central I

llinois Ligh t , 21 3 Ill. 2 d at 1 53 . We wil l on ly con stru e th e lan guage of an ins uran ce p oli cy again st th e in sure r wh ere t he wo rds are amb igu ou s. Val leyFor ge , 22 3 Ill. 2 d at 363. However, a policy ’s l anguag e will not be deemed ambiguous “ simply [because] the par ties1-09- 1634

23

can sugg est cr eativ e possibili ties f or their meaning. ” Val leyFor

ge , 223 Ill. 2d at 36 3. Rath er,
wo rds are amb igu ou s on ly if they are re ason ably su sce pti ble to m ore than on e in terp retati on . Val leyFor

ge , 22 3 Ill. 2 d at 3 63 . We wil l no t searc h for am big uit y whe re th ere i s no ne . Valley For ge , 22 3 Ill. 2 d at 3 63
. There is no ambiguity

here: the plai n, ordina

ry meaning of

an a dverti sing injur

y requires that th e inj ury result from an ad vertisem ent . In f act, to es tablish that an ad vertisin g inju ry
occur red , a n ins ure d must

demonst ra te a s a thr eshol d mat

ter tha t i t wa s eng ag ed in “a dver tis ing activ ity ,” which encompasses more than the mer e publicati on of a n adver tisement. See Lexma rk , 327 I ll. App. 3d at 137- 38; see al so Ba rr yR. O strag er & Thomas R. Ne wman, Han dbook on I nsur anc e Cove ra ge D isp utes §7. 04(b) (10t h ed. 2000) . The adv ertise ment i s i nher ent i n the nat ure of the i njur y ; we ca nnot s epara

te t hose c oncept s. Indeed, itis dif f icul t t o conce iv e of

any context in which a

n adver tisinginjury

would not occur as a

result of a n adver tisement or ot

her adv ertisi ng a cti vi ty . Theref ore , pl ai ntif

f s’ int erp ret at ion of

the p olic yis unre as onabl e and does not int rod uc e any am big uit y that w e m ust reso lve agai nst Zu rich
. Val leyFor ge , 22 3 Ill. 2 d at 3 63
. As stated above, absen t any specific policy provisio n to th e con trary , an insured m ust estab lish that it was en gaged in ad verti sin g acti vity th at co nte mp lates the “ ‘wid esp read distr ibution of promotional material to the public at large.’ ” Lexma rk , 32 7 I ll. App. 3d at 137- 38, quo ting Flori

sts ’ Mutual , 20 1 I ll. App. 3d at 433. Plainti f f s ha ve admitt ed tha

t their showroom display s were not adverti sements to the g eneralpublic. Rat her, t hey have maintained that t hey adv ertise d to retaile rs , a “s peci f ic ma rk et s egme nt” of

the g ener al publi c, f

or pur poses of comp lying with the languag e of the CGL po licy. However, adverti sing activi ty under the umbrella1-09- 1634

24

poli cy is not l imit ed in the s ame manne r a nd does not allowf

or a n ins ure d’s broadca st or publication of promo tional materia ls to “market segments.” Therefore, they did not en gage in ad ve rti sin g ac tiv ity a nd th ere was no “ad ve rti sin g inju ry” u nd er t he um br el la p ol ic y. Acc or di ng ly, Zu ric h a lso ha s n o o bl iga tio n t o i nd em ni fy pl ain tiffs u nd er t he um br el la p ol ic y.

C. Zurich’ s Duty

to “Reimburse” Monogram’s Defens e Expenses Plaintif fs next argue that both the CGL p olicy and the umbrella policy entitle them to “reimbursement” for defense expenses they paid on behalf of Mo nogram; however, they aga in fail to pr ovi de us with a l egal f ra mework unde r whi ch to analyze the is sue. Thus, the i mprec isi on of the ir argume nt req uires u s to first de term ine whe the r we sh ou ld analyze this iss ue u nd er Zu rich’s duty to de f end Monogr am or

it s dutyto i ndemnif

ypla inti f f s f or t he def ense expe nses pai d on M on ogram ’s be half. Plai ntif fs complaint in the court below did not asser

t a s pecif ic theory under which they soug ht r ecov ery

of Monogr am’ s def

ense expe nses . I

n f ac t, the p ra

y er f or reli ef mak es no menti on at al l of the def

ense expenses paid on Mo nogram’s behalf . However, in plaintif

fs’ brief on appeal, th ey arg ue th at M on og ram was a “li ce ns or wh om [p lai nt iffs] ag ree d t o d efe nd an d i nd em ni fy” pursuant t o their li cense ag reement, t hat they did pay Mon ogra

m’s def ense expenses, and that

they were entit led to “reimbursement” f or those expenses . However , they als o cite to a

provisi on in the Su pp lem en tary Payme nts sec tio n o f the C GL po licy th at ob ligate s Zu rich to “d efen d” M on ogram in the underly ing la

wsuit a s plai ntif

fs ’ indemnitee.1-09- 1634

25

W e c o n cl u d e t h at t h is is su e m u st be an aly ze d as Z u ric h ’s d u ty, i f an y, to in d em n ify plainti ff s f or def ense expenses pa id on Mo nogram’ s behalf . Our supreme court def ines “indem nification” as “ ‘[ 

### r]e i m bur se men t or c om pen sa ti on f or l oss , da mag e, or l

i ab i li ty i n tort;
es p[ ec i al l y], th e ri gh t of a p ar ty wh o i s s ec onda

ri l y li ab l e to rec ov er

f rom th e p ar ty wh o i s pri mari l y li ab l e f or re i m bu rs em en t of ex pend i ture s p ai d to a thi rd p arty f or in juri es resul ting f rom a vi olation of a comm on-law duty .’ ” Virginia Surety Co. v. Northern Insurance Co . of New York , 2 24 I ll. 2d 5 50, 566 (2 007 ), quo t ing Black 's Law Dicti onary

784 (8 th ed . 2004)
. Here, plaintif

fs are seeking t o recover amounts paid that arose out of the lia bility they

assumed in the lice nse agreeme nt, whic h com ports with the co ncep t of indem nification cited above. See also Boeing , 38 5 Ill. Ap p. 3 d at 4 1. M ore ove r, even if Zuri ch ini tially h ad a d uty to de fend M on ogram in the underly ing la

wsui t, once pl ai ntif

f s pa id the cos ts, the i ss ue bec ame one of indemni f

ica tion under the sup reme court’s definition. That is, plaintif fs would have been a “part y secondarily li ab le” to Mono gr am se ek ingto recov er f ro m Zur ich , the part

y“p ri mar

il yli ab le” to Mono gr am, expenditures plaintif

fs paid to Monogram’s att orneys f or def ense costs. Thus, this is sue involves Zu ric h’ s d ut y to in de m ni fy. As ex plained a bove, Zuri ch’s duty

to indemnify

plainti ff s arises only

if the injuri es al leged in the underly ing la

wsuit were actua lly

covered under the polic y. See Binney & Smith , 393 Ill. App. 3d at 290. We have alr ea dydete rmi ned th at the CGL poli cy

does not provi de cov erage f or the injuries all eged in the underlying complaint beca use they were not “ adver

tisinginjuries .”1-09- 1634

26

T he refore , Zu rich has n o d uty to ind em nify plai nti ffs f or M on ogram ’s de fense exp en ses u nd er th at po lic y. Tu rning to the umb rella policy , plaintif fs rely on paragra

ph A of the Special Liability Co verage sec tio n to sup po rt th eir c laim for “reim bu rsem en t.” It pro vid es th at Zu rich wil l pay “those sums [plaintif

fs] becom e[ ] legally obliga ted to pay or a ssume[ ] under an ‘insured contract’
* * * . The injury

or d ama ge mus t be c aus ed by an ‘ occur

ren ce’ whic h re sul ts in * * * ‘a dver tis ing injury ’ * * * .” Once ag ai n, a s we hav e det ermi ned, the alle gation s of the under ly ing complaint do
no t co nst itu te “ad verti sin g in juri es” be cau se th ey did no t arise ou t of adv ertis ing activ ity. Th eref ore, Zurich also has no duty to indemnify pla intiff s f or amounts paid on Mo nogram’s behalf in defense of those alleged injuries. D. Plaintiff

s’ Entitlem ent to P rejudgm ent Interest Fi na ll y , plaint if

f s a ll eg e tha t pu rs ua nt t o se cti on 2 of the I ll inoi s I

nte re st Ac t ( 815 ILCS 205 /2 (We st 200 4)), they are entitled to p rejudgm ent int erest on th e amou nt of the de fense expe nses Zuric h was o rdered to p ay f ollo win g the fee p etitio n he aring. T he d ecisi on to award pre judg ment i nterest

is a ma tte r wi thinthe s ound dis cre tionof the c ir cuit

cour t a nd wil l not

be
reve rsed abse nt an abu se o f disc retio n. Marches chi v . I llinois Far

mersIns uranceCo. , 298 Ill. App. 3d 306, 313 ( 1998). I n orde r t o re cove r prejudgment i nterest , t he amount due mustbe liq uid ated or su bje ct to an eas y dete rmi nati on . Marches chi , 298 Ill. App. 3d at 31 4, citing Couch
v. State Far

m Ins uranceCo. , 27 9 Ill. Ap p. 3 d 1 05 0, 1 05 4 (1 99 6). I n Couch , t

he ci rcu it court deni ed pr ejudgment i nterest on the awa

rd be cause t

he amount du e was no t easi ly det erm ine d. Couch , 27 9 I ll. App. 3d at 1055. The plainti f f in that ca se s ought1-09- 1634

27

over $270,000 in cla imed damages, but was a warded only

$35,000. The Couch court concluded that “[ t]his f

act alone serves as a

strong indication that the amount of damages was not rea dily
ascer taina ble.” Couch , 27 9 Ill. Ap p. 3 d at 1 05 5. In t his cas e, a ft er a

three- day

evidentia

ry heari ng in which plai ntif fs sought to r ecover appro ximate ly $2 m illio n in out stand ing d efense expe nses they claim ed th ey were o wed , the co urt
awa rde d them $ 271,0 17.90 . The va st dis parity in the amount s ought

and the a

mount a warded, together with the lengt

hy ev identiar

y hea ring required to cal culate t he amount of the f

ees due, simila rly support the conclusion that the dama ges wer e not easi ly determined, nor

were they liquidated. See Couch , 27 9 I ll. App. 3d at 1055. There f ore , t he cour t di d not e rr

in de ny ing plaintif fs’ motion for prejudgmen t interest. For the foregoing r easons, we af fir m the jud gment of the circuit court. Af f ir med.REPO RTER OFDECISI ONS - ILLI NOIS AP PELL ATE COURT

_________________

_________________

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______________ SAN TA’S B EST C RAFT , L.L.C., a Delaware Limited Liability Com pany; SANTA’S BEST, an Ill in oi s Ge ne ral

Par tn er shi

p; an d H.S. C RA FT MA NU FAC TUR ING COM PAN Y, a Ta iwanese Corp oration,

Plai nti ffs-Appell ants,
v. ZURICH AM ERICA N INSU RAN CE COM PANY, a New York Corporation

Defenda nt and Third-Party Plaintiff-Appellee (St. Pau l Fi re an d MarineInsur ance Com pany,

Third-Party Defendant).

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_____________ No. 1-09-1634 Ap pellate C ourt of I llinois First District, Second Divi sion Fil ed: December 21,2010

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______________ JUST ICE C ONN ORS d eliver ed the opini on of the c ourt. Cunningham , P.J., and Ka rnezis, J., concur.

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______________ App eal from the Circui t Court of Cook County Honorab le Richard J. Siebel and Stuart Palm er, Judges Presiding

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__ For PLAIN TIFFS- Gary I. Blackman David A. Gaun tlett APPELLANTS Mitchell Bryan Jam es A . Lo we Lev enfeld Pe arls tein Gau nt lett & Associ ates 2 N. LaSalle St ., Suite 1300 18400 Von Karman, S uite 300 Chicago, I lli noi s 60602 Irvin e, Calif ornia 92612 For DEFENDANT- Jef frey A. Gol dw ater APPELLEE: Per ry M . Shorr is Lewi s, Bris bois , Bisg aard & Smit h,LLP 550 W. Adams St., Suite 300 Chicago, I lli noi s 60661