Columbia Cas. Co. v. Hiar Holding, LLC
(Mo. Aug. 13, 2013)
The Missouri Supreme Court recently ordered an insurer to indemnify its insured for a $5 million settlement in an underlying Telephone Consumer Protection Act (TCPA) case, $3 million of which was in excess of the policy’s limits.
The TCPA provides a private right of action for recipients of unsolicited communications that are sent via automatic dialers, among other methods. A recipient may bring an action to recover $500 per violation, as well as treble damages for willful violations of the act. The insured, a hotel proprietor, used a marketing service to send approximately thousands of unsolicited facsimiles to individuals in the St. Louis area. Thereafter, a local company filed a class action suit seeking recovery on behalf of the class.
The hotel tendered its defense and indemnity to its CGL insurer, which denied coverage. The insured ultimately forwarded a demand for the policy limits of $2 million, but the insurer continue to disclaim any obligation to defend or indemnify. The hotel then entered into a $5 million settlement with the insurer and assigned any right to insurance proceeds to the class. The class filed a garnishment action against Columbia, alleging that the policy provided for coverage for both “property damage” and “advertising injury.” Columbia objected and filed a declaratory action seeking clarification of its obligations under its policy.
The insurer argued that it was not obligated to defend the insured because the $500 statutory damages amount was a penalty, not “damages” within the meaning of the policy. The Missouri Supreme Court rejected the insurer’s argument, finding that it was inconsistent with the Eight Circuit’s decision in Universal Underwriters Insurance Co. v. Lou Fusz Automotive Network. Inc., which determined that the $500-per-occurrence award was simply not a “penalty.” 401 F.3d 876 (8th Cir. 2005). The Court further held that the unsolicited communication amounted to both “property damage” because it was undertaken negligently, and “advertising injury” because the policy language was sufficiently broad to include claims for violation of privacy rights. Finally, the Court rejected the insurer’s attempt to limit its indemnification obligations to the policy limits due to the insurer’s wrongful refusal to defend. The Court ultimately upheld the trial court’s judgment against Columbia in the entire amount of the class settlement– $5 million.