No Coverage for Telemarketing Litigation Under Commercial Umbrella Policies

Lawsuits brought against satellite and other television broadcasters for telemarketing violations typically spark requests for insurance coverage to defend and ultimately indemnify the broadcaster in those lawsuits.  More often than not, the request for coverage ends up in litigation over whether the insurance policy covers the allegations in the underlying lawsuit.  A Colorado federal court recently addressed this issue and granted summary judgment to the insurer.

In National Union Fire Insurance Co. of Pittsburgh v. Dish Network, L.L.C., No. 15-cv-01053-JLK (D. Co. Apr. 17, 2020), the court addressed whether an commercial umbrella insurer for several years had to defend and indemnify the policyholder for an underlying lawsuit brought by the United States and several states alleging that the policyholder had repeatedly engaged in illegal telemarketing practices.  In the underlying case, a $280 million judgment was entered against the policyholder along with a permanent injunction.  The court addressed only two of the policies because the parties agreed that a decision on those two policies would control the later policies.  Cross motions for summary judgment were made and the court granted the motion in favor of the insurance company, finding that the underlying lawsuit had not triggered the duty to defend or indemnify.

The court looked to the allegations of the underlying lawsuit, which was brought under the TCPA and related state laws governing telemarketing.  The complaint included twelve counts of telemarketing violations and sought monetary civil penalties and a permanent injunction.

The policies were slightly different.  The 2003 Policy covered sums that the insured became legally obligated to pay because of bodily injury, property damage, personal injury or advertising injury.  The 2004 Policy covered sums that the insured became legally obligated to pay as damages because of bodily injury, property damage or personal injury and advertising injury  Much of the opinion discusses whether there is a legal distinction between these formulations where the 2004 Policy uses the phrase “as damages” and the 2003 Policy does not, and where the 2003 Policy has personal injury and advertising injury separate and the 2004 Policy has them together.  There were also slight differences in the defense provisions of the policies.  The policies also had exclusions relevant to advertising injuries by broadcasters and other publishing activities.

The court also addressed the prior declaratory judgment actions over the primary policies that sat below these umbrella policies and how the courts reached opposite conclusions.  The court relied on the 10th Circuit’s decision in Ace American Insurance Co. v. DISH Network, L.L.C., 883 F.3d 881 (10th Cir. 2018), which held that the monetary penalties sought and the request for a prospective injunction were not insurable and, therefore, not covered by the underlying policies.

The court ultimately concluded that none of the allegations or requests for relief were covered by the policies. As to the TCPA and other statutory damages sought, the court held that the damages sought by US and the states were not remedial in nature and were sought as a penalty.  Because penalties were not insurable under Colorado law, the insurer had no obligation to defend or indemnify the policyholder.  The court also ruled out coverage under any of the coverage grants of the policy, finding that the allegations did not implicate the policies’ coverage for bodily injury and property damage.  As to personal jury and/or advertising jury, the court held that the exclusions precluded coverage.

Because the court held that there was no duty to defend the underlying TCPA action, the court found no duty to indemnify as well.

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