TCPA Statutory Damages Are Uninsurable Penalties Under Colorado Law

Applying Colorado law, the United States Court of Appeals for the Tenth Circuit has held that statutory damages sought under the Telephone Consumer Protection Act are uninsurable penalties, and that injunctive relief does not constitute “damages.”  Ace American Ins. Co. v. Dish Network, LLC, 2018 WL 988404 (10th Cir. Feb. 21, 2018).

The federal government and four states sued the insured company, alleging violations of the TCPA and seeking a permanent injunction and damages of $1,500 for each TCPA violation committed willfully and knowingly, and $500 for each violation that was not willful and knowing.  The insured sought coverage from its general liability insurer, which subsequently filed suit for a determination that it had no duty to defend or indemnify the insured.  The district court granted summary judgment to the insurer.

The court of appeals affirmed, holding that the rule that Colorado public policy prohibits insuring intentional or willful wrongful acts barred coverage for TCPA statutory damages.  The state supreme court had held that TCPA damages were punitive for purpose of assignability, and the appeals court concluded that it could not depart from that holding absent a compelling reason to do so.  The insured argued that a portion of the TCPA is remedial rather than penal, and while the appeals court agreed, it noted that the underlying complaint’s prayer for relief did not seek actual monetary loss, even in the alternative.  Instead, it sought only statutory damages, which are not remedial.

The appeals court also affirmed the district court’s holding that the costs of complying with injunctive relief are not insurable damages.  The court concluded that the plain language of the policy required the insurer to indemnify damages arising from past injuries, not the cost of preventing future violations.

In addition, the appeals court declined to treat a boilerplate prayer for “other ancillary relief to remedy injuries caused by [the insured’s] violation of the TCPA” as seeking covered damages, as doing so would make it impossible for insurers to avoid a duty to defend, even when the damages sought are expressly not covered.