Are TCPA Penalties Uninsurable? How about Punitive Damages?



The Illinois Supreme Court will soon be addressing whether the statutory penalty of $500 per faxed advertisement allowed under the TCPA is in the nature of punitive damages and uninsurable. It is anticipated that the Supreme Court will  also address the insurability of punitive damages generally, an issue never squarely addressed by the Supreme Court.  The Supreme Court accepted the petition (No. 114617) to review Standard Mutual Ins. Co. v. Lay, 2012 WL 1377599 (4th Dist. Apr. 20, 2012), in which the Appellate Court found that the TCPA penalty is uninsurable, as a matter of public policy, because such awards are intended to punish and deter – a purpose that would be undermined if the policyholder could pass those penalties on to their insurer.  


An Amici brief was submitted on behalf of the Property Casualty Insurers Association of America and the National Association of Mutual Insurance Companies supporting the Appellate Court's ruling.    Amici also argued that business entities do not have any privacy rights under the TCPA because the only privacy right the TCPA statute addresses is the right of residential privacy. As business entities have no residential privacy rights, they cannot recover under general liability coverage for publication of material that violates a right of privacy.  

The Plaintiffs-Appellants are represented by Anderson + Wanca and Bock & Hatch, the two Chicago-area firms that specialize in representing plaintiffs in class action lawsuits under the TCPA. In the Lay case, Class counsel was able to convince the insured to stipulate to liability and to a judgment in the full amount sought by the class ($ 1.7 million in statutory penalties), in exchange for which the Class agreed to execute the judgment only against the defendant’s insurer and not against any personal assets of the defendant/insured. It is against this backdrop that the Supreme Court will be reviewing whether that stipulated judgment - entered without the consent of the insurer- is insurable. The Amici brief was authored by Dan Cunningham and Shaun McParland Baldwin of Tressler LLP.

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