(Article from Insurance Law Alert, November 2021)
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The Tenth Circuit affirmed a Colorado district court decision holding that an insurer had no duty to defend or indemnify claims that DISH Network violated the Telephone Consumer Protection Act (“TCPA”) because relief under the statute constitutes an uninsurable penalty rather than covered damages. Nat’l Union Fire Ins. Co. of Pittsburgh v. DISH Network, LLC, 2021 WL 5066571 (10th Cir. Nov. 2, 2021).
The United States and several states sued DISH, alleging violations of the TCPA based on the company’s solicitation calls to potential customers. The suits sought statutory damages and injunctive relief to prevent future violations. National Union sought a declaration that it had no duty to defend or indemnify the claims under its umbrella policies. A Colorado district court granted summary judgment to National Union and the Tenth Circuit affirmed.
The Tenth Circuit ruled that TCPA statutory damages are a “penalty” under Colorado law and thus uninsurable as a matter of Colorado public policy. In so ruling, the court relied on ACE Am. Ins. Co. v. DISH Network, LLC 883 F.3d 881 (10th Cir. 2018) (discussed in our March 2018 Alert), in which coverage for TCPA damages was similarly denied. The Tenth Circuit rejected DISH’s assertion that ACE was abrogated by a Colorado Supreme Court decision which held that statutory relief for an unreasonable delay or denial of benefits is not a “penalty” for statute of limitations purposes and that the test for determining whether statutory relief is a “penalty” must be based on legislative intent rather than the common law test used in ACE.
In addition, the Tenth Circuit ruled that National Union had no duty to defend claims for prospective relief because its policies did not cover the costs of preventing future harms. The court expressly rejected DISH’s contention that policy language covering expenses it was legally obligated to pay “by reason of liability imposed by law” encompassed the cost of preventing future harms.