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Many companies involved in outbound calling carry insurance for Telephone Consumer Protection Act (“TCPA”) liability purposes or rely on their general liability insurance for such purposes. But a recent decision out of a U.S. District Court in Colorado is a reminder that companies should be vigilant when obtaining insurance policies to ensure the policy explicitly cover TCPA liability costs. Companies should also be familiar with the laws governing the application of insurance policies in any state in which they operate (including states which an outbound calling campaign targets).
In Ace American Insurance Company v. Dish Network, LLC, a federal District Court judge ruled that Dish’s insurance coverage did not apply to claims involved in a pending TCPA lawsuit. On March 28, 2016, the District Court held that neither the statutory damages nor the injunctive relief sought in Dish’s TCPA lawsuit constitute “damages” under Colorado law. Instead, the court, using non-TCPA based case law from the Colorado Supreme Court, concluded that the statutory damages provided for by the TCPA are a penalty under Colorado law and that “such penalties, like punitive damages, may not be the subject of insurance coverage.” Likewise, the court concluded that the injunction sought by the plaintiff’s in Dish’s TCPA lawsuit was not a damages claim because “such an order would not legally obligate Dish to pay damages to a person or entity wronged by Dish.” Therefore, Ace (Dish’s insurer) has no duty to defend or indemnify Dish in its underlying TCPA suit.
With respect to a separate portion of Dish’s insurance coverage purchased from Ace for damages related to “personal and advertising injury,” the Court concluded that a clause within that provision also rendered it inapplicable to Dish. The provision excluded coverage for “an insured whose business is: (1) advertising, broadcasting, publishing or telecasting; (2) designing or determining content of websites for others; or (3) an internet search, access, content or servicer provider.” The Court found that Dish fits the commonly-understood definition of broadcasting and telecasting. While this portion of the decision may appear to narrowly affect businesses similar to Dish, the insurance provision’s reference to a business who designs or determines content of websites for others or provides Internet content could significantly expand the reach of the Court’s interpretation of this insurance provision.
While this decision raises some concerns for businesses operating in Colorado, it is worth noting that this is a U.S. District Court interpretation of Colorado law. Thus, the decision will have relatively little precedential impact. Colorado courts generally are not bound to adopt the holding of a federal court interpreting Colorado law, and the District Court’s decision does not set precedent for other federal district or appellate courts.
Instead, businesses should view this decision as a reminder to review any insurance policy on which they rely for TCPA liability coverage, particularly policies covering businesses operating in Colorado. Businesses should also make sure they understand the state laws that govern their insurance policies, lest they find themselves in a situation similar to Dish.
Other TCPA News and Notes
As you will see in the TCPA Compliance Monitor for this month, the Federal Communications Commission released three public notices in March seeking comment on TCPA related matters.
The Papa Murphy’s Public Notice seeks comment on a petition for retroactive waiver of the Commission’s new prior express written consent rule as adopted on October 16, 2013. Comments are due by April 21, and reply comments are due by May 6.
The Todd C. Bank Public Notice seeks comment on a petition for declaratory ruling that asks the Commission to create a bright-line rule that any telephone number registered with a telephone company as a residential number is residential for purposes of the TCPA, even if the user uses the number as a business line. Comments are due by May 2, and reply comments are due by May 17.
Finally, the FCC seeks comment on three more petition seeking retroactive waiver of the Commission’s fax advertisement opt-out rules. Comments are due by April 8, and reply comments are due by April 15.
If your company would like assistance reviewing its insurance policies for TCPA coverage or would like to submit comments in response to any of the public notices issued by the Commission, please contact Seth Williams at email@example.com, Jane Wagner at firstname.lastname@example.org, or Nate Hardy at email@example.com.