(Article from Insurance Law Alert, April 2016)
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A Colorado federal district court and an Ohio appellate court denied coverage for claims alleging violations of the Telephone Consumer Protection Act (“TCPA”).
In Ace American Ins. Co. v. Dish Network, LLC, 2016 WL 1182744 (D. Colo. Mar. 28, 2016), a Colorado federal district court ruled that an insurer had no duty to defend or indemnify claims that DISH Network violated the TCPA.
The United States and several states sued DISH, alleging that it violated the TCPA and related state laws by making solicitation calls to phone numbers on the Do Not Call Registry. Plaintiffs sought statutory damages, civil penalties and an injunction preventing future TCPA violations. Ace filed a declaratory judgment action, seeking a ruling that it had no duty to defend or indemnify the claims. The court agreed and granted Ace’s summary judgment motion.
The court ruled that general and excess liability policies did not provide coverage because the underlying claims did not seek “damages.” The underlying complaint sought statutory damages under the TCPA ($500 for each violation), as well as treble damages and civil penalties. The court held that these forms of relief are financial penalties that are punitive in nature rather than compensatory or remedial. The court therefore ruled that the statutory damages were excluded from insurance coverage under Colorado law. The Supreme Courts of Illinois and Missouri reached the opposite conclusion, ruling that TCPA damages were not uninsurable punitive damages. See Standard Mutual Ins. Co. v. Lay, 989 N.E.2d 591 (Ill. 2013) (discussed in June 2013 Alert); Columbia Casualty Co. v. HIAR Holding, L.L.C., 411 S.W.3d 258 (Mo. 2013) (discussed in September 2013 Alert).
The court also ruled that coverage under a Personal and Advertising Injury provision was barred by a Broadcasting and Telecasting Exclusion. The court noted that although TCPA claims might fall within the scope of Personal and Advertising Injury as an “invasion of seclusion” claim, coverage was nonetheless barred by an exclusion for insureds in the business of “advertising, broadcasting, publishing or telecasting.” In so ruling, the court rejected DISH’s argument that the exclusion was ambiguous and/or should be construed to apply only to businesses that produce content.
An Ohio appellate court also rejected coverage for TCPA claims, ruling that an insurer had no duty to indemnify a class action settlement arising out of fax blasting claims. Acuity, A Mutual Ins. Co. v. The Siding and Insulation Co., 2016 WL 1276471 (Ohio Ct. App. Mar. 31, 2016).
Acuity had paid nearly $2 million toward an underlying settlement pursuant to a Personal and Advertising Injury provision. However, the policyholder sought an additional $2 million under a Property Damage provision, which covered property damage caused by an “occurrence,” defined as “an accident, including continuous or repeated exposure to substantially the same harmful conditions.” The court agreed with Acuity that sending unsolicited faxes does not constitute an “occurrence” and is precluded by the intentional acts exclusion. The court explained that even if a policyholder does not intend to violate the TCPA, it does intend to send the faxes, with knowledge that sending them would use the recipients’ paper, toner, and time. The court stated, “[u]nder Ohio law, an intent to cause harm will be inferred when ‘the insured’s intentional act and the harm caused are intrinsically tied so that the act has necessarily resulted in the harm.’”