In Ace American Insurance Co. v. Dish Network, the Tenth Circuit ruled that statutory damages and injunctive relief under the Telephone Consumer Protection Act (TCPA) are uninsurable “penalties” under Colorado law, affirming a district court decision that Dish Network’s insurer had no obligation to indemnify and defend its policyholder.
Last year, Dish Network was hit with a record $280 million judgment for violations of the TCPA, Telemarketing Sales Rule and state law in a suit brought by the Federal Trade Commission, the Department of Justice and state attorneys general. Dish tendered the action to its insurer for coverage, and Ace sought a declaratory judgment that it need not defend or indemnify the company, arguing that the statutory damages sought by the regulators were a “penalty” and therefore uninsurable, while the injunctive relief did not qualify as damages under the policy’s definition. The district court agreed, and the Tenth Circuit affirmed.
In finding no coverage existed for Dish Network, the court relied on a Colorado Supreme Court case holding that both nonwillful and willful damages under the TCPA are penalties because “the TCPA created a new and distinct cause of action, did not require proof of injury, and allowed damage awards that would always be greater than any actual damage suffered.” While Dish Network argued that the TCPA’s provision for actual monetary loss is a remedial provision insurable under Colorado public policy and sufficient to trigger the duty to defend, the court reasoned that the actual relief sought in the underlying complaint reflected that only statutory relief was sought, thus no duty was triggered.
The panel also squarely rejected Dish Network’s argument that the cost of complying with the government’s request for an injunction would be insurable, ruling that “under the plain language of the policies, ACE is obligated to indemnify damages arising from past injuries, not the cost of preventing future violations.”
Why it matters: This decision highlights the difficulty many companies face in obtaining coverage for TCPA suits under general liability policies, even those that do not have specific TCPA exclusions (which most now do). Companies that wish to insure against TCPA risk would be wise to consider a specific TCPA policy.
To read the order in Ace American Insurance Co. v. Dish Network, click here.