Illinois Supreme Court Hears Arguments Over TCPA Insurance Liability

Illinois Supreme Court Hears Arguments Over TCPA Insurance Liability

By Courtney Coren

A class action lawsuit that originated in Madison County, Illinois, concerning whether fines from the Telephone Consumer Protection Act (TCPA) are insurable was heard last month in the Illinois Supreme Court.

The case (Standard Mutual Insurance Co. v. Norma Lay, et al.) came from the Illinois Fourth District Appellate Court, which is the court that determined the $500 penalty for punitive damages to companies that violate the TCPA and are not insurable.

The case began when Ted Lay Real Estate Agency sent an advertisement via fax to Locklear Electric, Inc. in 2006. Lay was not given permission by Locklear to fax the advertisement and violated one of the rules under the TCPA, which requires a $500 penalty for faxes sent without permission.

The TCPA class action lawsuit filed against Lay claimed that the real estate agency had sent out 3,478 faxes in June 2006. They settled in 2010 for about $1.7 million.

In 2009, a class action lawsuit was filed against Lay, with Locklear representing the class, in the Madison County Circuit Court. The case was later transferred to the U.S. District Court for the Southern District of Illinois. The Fourth District Appellate Court agreed with this move.

Standard Mutual Insurance Co. is serving as the defendant in place of Lay. Standard is the commercial general liability carrier for Lay. They were told they had to defend Lay based on various policy provisions. This movement was determined by the Macoupin County Circuit Court in a declaratory judgment action that was filed. The issue at hand is whether or not the punitive damages can be covered by an insurance company.

“We find that the $500 in liquidated damages provided in the TCPA is a penalty and is in the nature of punitive damages. They are not insurable as a matter of Illinois law and public policy and are not recoverable from Standard,” according to the opinion of the appeals panel at the Fourth District Appellate Court.

Michael Reagan, the attorney representing the appellants, argued that when the case was presented to the appellate court that “the issue was framed incorrectly” and “therefore, the court’s analysis never reached the true heart of the issue.”

He argued that the justices in the appellate court “did not engage in a close reading” of relevant cases that would have supported the appellants’ argument.

The case he was citing is Beaver v. Country Mutual Insurance Co. (1981), which argued that if punitive damages are insurable then they won’t serve the purpose as a deterrent. But, Reagan argued that what ought to be considered is not if punitive damages can be insured, but “whether the conduct of the insured, which gave rise to the damages, can be insured.”

He also argued that private contracts ought to be honored and that the appellate court didn’t take that into account.

Robert Chemers, the attorney representing Standard, argued that the appellate court “got it right,” and he’s not sure if the settlement is even legitimate.

“To call it a settlement is kind of questionable” especially if the damages can’t be covered by insurers.

If you or someone you know receives unsolicited faxes, phone calls, or text messages, legal options are available. Learn more and get a free legal consultation regarding a claim’s eligibility at the Text Message Spam, Cell Phone Call TCPA Class Action Lawsuit Settlement Investigation. Experienced legal professionals are available to determine if you have case, so act now.

Updated April 5th, 2013

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