Missouri Court of Appeals Reverses and Renders Summary Judgment, Holding Insurer Not Liable For Indemnity Because TCPA Statutory Damages Are A Penalty

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Columbia Casualty Co. v. Hiar Holdings, L.L.C., No. ED 98253 (MO. App. E.D. Oct. 23, 2012)

Plaintiff insurance company appealed the trial court’s summary judgment order in favor of Defendants who had settled an underlying action involving the allegedly unsolicited transmission of more than 10,000 faxes in violation of the TCPA for $5 Million. Specifically at issue in the declaratory judgment action was whether Plaintiff’s insurance policy provided coverage for the settlement. Reversing and rendering judgment in favor of Plaintiff, the court noted its previous opinion, released after summary judgment had been granted, concluding that statutory damages under the TCPA are penal in nature, and do not constitute damages covered by policy language identical to the one at issue.

Noting that the policy did not define the term damages, and under Missouri law, unless otherwise bargained for, the term damages does not include fines and penalties, the court rejected Defendants’ argument that the $5 Million settlement was simply an “arbitrary figure” negotiated between the parties in the underlying action. Recognizing that while it is true the mere sending of a junk fax is actionable regardless of receipt, it struck the court that the settlement corresponded exactly to the calculation of statutory damages for the faxes actually received.

The court also rejected Defendants’ argument that coverage existed because the settlement amount was essentially contract consideration, not a penalty. This was because if Defendants’ argument was correct, an exclusion precluding coverage for damages or injury assumed in an agreement that would not exist absent the agreement applied. In short, Plaintiff had not duty to provide indemnity for the settlement amount unless Defendant would have faced the same liability for damages absent the agreement. Absent the agreement, however, Plaintiffs’ exposure for TCPA statutory damages was exposure to a penalty for which the policy did not provide coverage.

For more information on TCPA regulation and effects, contact Burr & Forman attorney, Joshua Threadcraft, here.