Getting hit with a $280 million judgment and a prospective injunction against future telemarketing practices is bad enough, but not getting insurance coverage to pay for the defense of the case or indemnify the statutory damages adds insult to injury. But, unfortunately, that is the nature of the lack of insurance coverage for TCPA violations.

In National Union Fire Insurance Co. of Pittsburgh v. Dish Network, L.L.C., No. 15-cv-01053-JLK (D. Co. Apr. 17, 2020), the court addressed insurance coverage for an underlying lawsuit brought by the United States and several states alleging that the policyholder had repeatedly engaged in illegal telemarketing practices.  In the underlying case, a $280 million judgment was entered against the policyholder along with a permanent injunction. 

The insurer issued a series of commercial umbrella polices to the policyholder. Underlying the commercial umbrella policies were primary polices issued by other carriers. Declaratory judgment actions were commenced by all the carriers, but this case only addressed the commercial umbrella policies. The court addressed only two of the policies because the parties agreed that a decision on those two policies would control the later policies. 

Both parties moved for summary judgment. The court granted the insurer’s summary judgment motion, finding that the TCPA action had not triggered the duty to defend or indemnify.

As courts do, it looked to the allegations of the TCPA action.  The complaint included twelve counts of telemarketing violations (under the TCPA and state law) and sought monetary civil penalties and a permanent injunction.

The insurance policies were slightly different.  The 2003 Policy covered sums that the insured became legally obligated to pay because of bodily injury, property damage, personal injury or advertising injury.  The 2004 Policy covered sums that the insured became legally obligated to pay as damages because of bodily injury, property damage or personal injury and advertising injury 

Much of the court’s opinion discussed whether there was a legal distinction between the policy terms. For example, the 2004 Policy uses the phrase “as damages” and the 2003 Policy did not. The 2003 Policy described personal injury and advertising injury as separate types of coverage and the 2004 Policy had them together.  There were also slight differences in the defense provisions of the policies.  The policies also had two exclusion for advertising injuries caused by broadcasters and other publishing activities.

While the court discussed the primary policy declaratory judgment actions, which reached opposite conclusions, it primarily relied on the 10th Circuit’s decision in Ace American Insurance Co. v. DISH Network, L.L.C., 883 F.3d 881 (10th Cir. 2018), which held that the monetary penalties sought and the request for a prospective injunction were not insurable and, therefore, not covered by the underlying policies.

The court ultimately concluded that none of the allegations or requests for relief came within the coverage grants of the policies. As to the TCPA and other statutory damages, the court held that the damages sought by US and the states were not remedial in nature and were sought as a penalty.  Notably, there were no consumers involved in the TCPA action; only the government. Because penalties were not insurable under Colorado law, the insurer had no obligation to defend or indemnify the policyholder. 

The court also ruled out coverage under any of the coverage grants of the policy, finding that the allegations did not implicate the policies’ coverage for bodily injury and property damage.  As to personal jury and/or advertising injury coverage, the court held that the exclusions precluded coverage.

There were two exclusions. One, the court called the Business Exclusion and the other the court called the Advertising Conduct Exclusion. The Business Exclusion precluded coverage for personal injury or advertising injury to an insured whose business was advertising, broadcasting, publishing or telecasting. The Advertising Conduct Exclusion precluded coverage for advertising injury or personal injury committed or alleged to have been committed in any advertising or advertisement in the conduct of the insured’s advertising, broadcasting, or other publishing activities. The court found both exclusions applicable even if the allegations of the TCPA action implicated coverage for personal injury or advertising injury.

Because the court held that there was no duty to defend the underlying TCPA action, the court found no duty to indemnify as well.