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10th Cir. Rules TCPA Action Not Covered by Insurance Under Colorado Law

The U.S. Court of Appeals for the Tenth Circuit recently affirmed summary judgment in favor of an insurance company, holding that the insurer had no duty to defend and indemnify its insured in a lawsuit alleging that the provider’s telemarketing phone calls violated several federal and state laws, because statutory damages and injunctive relief under the Telephone Consumer Protection Act (TCPA) are uninsurable penalties — not damages — under Colorado law and the insurance policies at issue.

A copy of the opinion in ACE American Insurance Company v. Dish Network is available at:  Link to Opinion.

The federal government and five states sued a national provider of satellite television, alleging violations of the federal Telemarketing Sales Rule (TSR) and the TCPA.

As you may recall, the TCPA makes it “‘unlawful for any person [subject to a limited list of exceptions] … to initiate any telephone call to any residential telephone line using an artificial or prerecorded voice to deliver a message without the prior express consent of the called party.’ The TCPA also permits states to ‘bring a civil action on behalf of its residents to enjoin such calls, an action to recover for actual monetary loss or receive $500 in damages for each violation, or both such actions.’ … For each violation that is committed ‘willfully or knowingly,’ the statute allows for treble damages up to $1,500.”

The defendant submitted a claim with its insurer, and the insurer responded that there might be coverage under one of the liability policies it issued, but reserving its right to deny coverage after investigating the claim.

The insurer decided that the defendant “was entitled to coverage and issued a check for $913,650.” However, the insurer “later reversed its decision and filed a Complaint for Declaratory Judgment, seeking a declaration that [it] did not have a duty to defend or indemnify [defendant] in the Underlying Lawsuit.”

The parties filed cross-motions for summary judgment.  The trial court found that the insurer had no duty to defend or indemnify because “the … policies do not provide coverage for any of the claims asserted in the underlying suit.”

Relying on a 2008 Colorado Supreme Court decision, the trial court held that “the TCPA statutory damages were a penalty and therefore uninsurable under Colorado public policy[,] … that the associated injunctive relief did not qualify as ‘damages’ under the policies’ definition … [and] that [defendant] was in the business of broadcasting and thus precluded from coverage under [one of the policy’s] broadcaster exception.”  Because there was no duty to defend, there was also no duty to indemnify.

On appeal, the Tenth Circuit explained that because the case was based on diversity jurisdiction, “it must apply the substantive law of the forum state[,]” Colorado.

The Court reviewed Colorado law governing the interpretation of insurance policies, explaining that “[w]hen resolving an insurer’s obligations in an anticipatory declaratory action brought before the conclusion of the underlying dispute, an insurer’s duty to defend is determined from the face of the complaint.”

The Tenth Circuit then analyzed the issue of statutory damages under the TCPA, concluding that “the TCPA’s statutory damages are penal under Colorado law and, even if they were otherwise covered under the policies, Colorado’s public policy prohibits the insurability of such penalties and bars coverage.”

The Court reasoned that “[t]he Colorado Supreme Court has held that Colorado public policy prohibits ‘insuring intentional or willful wrongful acts … [in order] ‘to prevent extending to the insured a license to commit harmful, wanton or malicious acts.’ … Specifically, ‘[t]he public policy of Colorado prohibits an insurance carrier from providing insurance coverage for punitive damages[,] … [which] are intended to punish the defendant for his wrongful acts and to deter similar conduct in the future’ rather than compensate the plaintiff.”

Relying on the Colorado Supreme Court’s ruling that statutory damages under the TCPA are not assignable because they are penalties as opposed to assignable compensatory damages, as well as the fact that the plaintiffs in the underlying lawsuit did not ask for actual damages in the complaint’s prayer for relief, the Tenth Circuit held that “the provision awarding statutory damages for violating the TCPA is a penalty under Colorado law and uninsurable as a matter of Colorado public policy. Therefore, [the insurer] had no duty to defend [the insured defendant] on these claims.”

The Tenth Circuit rejected the insured’s argument that the trial court’s “interpretation of insurable damages as ‘actual damages’ was improperly narrow because the Colorado Supreme Court has held ‘that the ordinary meaning of ‘damages’ is broad and covers’ equitable relief. … Therefore, … the costs of complying with an injunction are insurable damages under the [subject] policies.”

The Court reasoned that because “[u]nder the plain language of the policies, [the insurer] is obligated to indemnify damages arising from past injuries, not the cost of preventing future violations[,] … the injunctive relief requested by the State Plaintiffs does not constitute ‘damages’ as defined by the … policies.”

The Tenth Circuit concluded that, because the statutory damages and injunctive relief requested in the complaint “do not create any possibility that [the insurer] would be obligated to indemnify [defendant], it has no duty to defend.”  Accordingly, the trial court’s summary judgment in the insurer’s favor was affirmed.

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Hector Lora has substantial experience in all phases of complex commercial litigation, including motion practice, written discovery, depositions, mediations, bench and jury trials, and appellate practice. For more than a decade, his practice has focused extensively on the defense of civil enforcement actions filed by the FTC, as well as real estate litigation, and contested mortgage and condominium lien foreclosures and foreclosure of security interests under UCC Article 9. Hector also has substantial experience in advising a variety of types of businesses regarding their compliance with applicable federal and state laws, including the Federal Trade Commission Act, the Telephone Consumer Protection Act, the Telemarketing and Consumer Fraud and Abuse Prevention Act, the Telemarketing Sales Rule, the Controlling the Assault of Nonsolicited Pornography and Marketing Act of 2003, and Florida laws governing telephone solicitation and communication. Hector received his Juris Doctor from the Georgetown University Law Center, and his undergraduate degree with honors from the University of Florida. For more information, see

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