In Missouri – Yes!
In Illinois – Yes!
In the 7th Circuit – No!
First, let’s look at Missouri. In Columbia Cas. Co. v. HAIR Holdings, LLC, 411 S.W.3d 258 (Mo. 2013), a marketing company sent over 12,0000 junk fax advertisements to various households. A private citizen brought a class action against the marketing company under the Telephone Consumer Protection Act (TCPA), 47 U.S.C. section 227 et seq and the parties settled. The defendant then brought an action against his insurance company. He claimed that his CGL policy should cover the settlement since it was a property or advertising damage or loss. The insurer denied the claim. The insurance company argued that the TCPA violations were intentional, therefore excluded from coverage. It also argued that statutory damages under the TCPA are akin to fines and penalties – also excluded from coverage.
Both the trial and appellate courts agreed that coverage should apply. The courts looked to the terms of the policy in order to define “damages.” Because it was not defined with specificity in the policy, the courts found that there was an ambiguity. One could reasonably read the coverage to apply. In the case of the TCPA, which is a civil statute, the fines represent “compensable harms” which are “encompassed by a liquidated sum within the fixed amount.” They are not necessarily punitive in nature – which allowed for coverage in this case.
Next, let’s turn to the Illinois case of Standard Mut. Ins. Co. v. Lay, 2013 IL 114617, 989 N.E.2d 591, 600 (Ill Sup. Ct. 2013). The same factual situation was presented there. The Illinois Supreme Court determined as a matter of law that the TCPA fines are remedial and not penal. It expressly found that the TCPA-prescribed damages of $500 per violation are not punitive damages. They are covered by a standard CGL policy. The insurer must pay them for the policyholder.
Now, let’s review the 7th Circuit case of Am. States Ins. Co. v. Capital Associates of Jackson Cnty., Inc., 392 F.3d 939, 942-43 (7th Cir. 2004). The court there found an opposite result. The court delved into the meaning of the TCPA statute, and what harm it was intended to protect. The court stated:
The structure of the policy strongly implies that coverage is limited to secrecy interests. It covers a “publication” that violates a right of privacy. In a secrecy situation, publication matters; otherwise secrecy is maintained. In a seclusion situation, publication is irrelevant. A late-night knock on the door or other interruption can impinge on seclusion without any need for publication. Contacting one customer at a time may not be “publication” at all for purposes of advertising-injury coverage. (Citations omitted). Perhaps automated faxes to hundreds of recipients could be deemed a form of publication, but this would be irrelevant to the seclusion interest. To put this differently, (TCPA) § 227(b)(1)(C) condemns a particular means of communicating an advertisement, rather than the contents of that advertisement—while an advertising-injury coverage deals with informational content.
What do we make of these disparate opinions on coverage? As always, the courts look first at the policy language to determine if the insurance carrier has specifically defined what it will and will not cover. Usually a disparity in legal rulings can be directly attributed to the disparity in insurance policy language from carrier to carrier.
Here, however, we have a different story. The 7th Circuit analyzed the case from the angle of statutory meaning – instead of focusing on policy terms. It found that the statute was drafted to prevent distribution of advertising. And the policy was drafted to cover injuries for the content of advertising. Thus, there was no coverage.