Mo. SC: Insurer is liable for damages agreed to in settlement

By Jessica M. Karmasek | Aug 21, 2013

JEFFERSON CITY, Mo. (Legal Newsline) -- The Missouri Supreme Court, in a ruling last week, said an insurer is liable for the damages that were agreed to in a settlement of a junk fax lawsuit between an insured and a class of plaintiffs.

In the case at issue, hotel proprietor HIAR Holdings LLC used a marketing services company to send about 12,500 unsolicited advertising facsimiles -- i.e. "junk faxes" -- to recipients in the 314 and 636 area codes in October 2001.

About 10,000 of the junk faxes were received. Karen S. Little LLC brought a class action suit under the Telephone Consumer Protection Act, or TCPA, seeking injunctive relief and statutory damages of $500 per occurrence (per fax sent).

The TCPA is intended "to protect the privacy interests of residential telephone subscribers by placing restrictions on unsolicited, automated telephone calls to the home and to facilitate interstate commerce by restricting certain uses of facsimile (fax) machines and automatic dialers."

It allows a private right of action for recipients of unsolicited communications that violate the law.

At the time it had sent the junk faxes, HIAR was insured under a commercial general liability insurance policy from Columbia Casualty Company. The policy's provisions included coverage for property damage and advertising injury.

After the class filed suit, HIAR tendered defense of the suit to Columbia. Columbia, however, refused to defend in a letter sent in December 2002.

It asserted that it would not defend the suit or provide HIAR coverage under its policy because the claims of the class were outside the policy provisions.

Eventually, the class and the insured reached a settlement, after which the class filed a garnishment action against Columbia.

The insurer then sought a declaratory judgment that its policy with the insured did not provide coverage, and its arguments included that there was no coverage for damages awarded related to the TCPA.

The trial court ultimately entered judgments in favor of the class, holding that Columbia wrongly had refused to defend the insured and was liable to indemnify the insured by paying the settlement amount plus interest.

Columbia appealed. The state's high court affirmed in its Aug. 13 ruling.

"Columbia is not persuasive in its assertions that the term 'damages' in its policy with HIAR could not encompass the class's TCPA claims," Chief Justice Mary Russell wrote in the court's 24-page opinion.

"TCPA statutory damages of $500 per occurrence are not damages in the nature of fines or penalties."

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.

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