The Law and the Fax
October 31, 2012 |The Telephone Consumer Protection Act (“TCPA”) makes it unlawful for any person within the United States to use any fax machine, computer, or other device to send unsolicited advertisements to another fax machine. The TCPA creates a private right of action and permits recipients of unwanted fax advertisements to obtain damages – including statutory damages of $500 for each violation. In a recent Illinois case, an insured argued that a $14 million TCPA settlement was covered by her insurance policy.
The case arose after the insured, a dating service, allegedly sent about 138,000 unsolicited faxes to potential clients and was named as a defendant in a TCPA class action suit. The suit settled for $14 million, an amount equal to the maximum amount of coverage under all of the insured’s policies. The insured sought coverage for the settlement amount from its insurer.
The insurer, represented by Rivkin Radler, contended, among other things, that the settlement was a penalty that could not be covered by the policies, noting that the actual losses sustained by the recipient of an unwanted fax seldom total more than a few pennies.
The Decision
The court agreed with the insurer, finding that TCPA claims were not insurable because the damages provided in the statute were “punitive in nature.” It then ordered judgment in favor of the insurer.
The Rivkin Rule
The actual cost to a recipient of an unwanted fax is far below $500, amounting only to the cost of a sheet of paper and some toner, as well as the brief time involved in an employee taking the unwanted fax from the fax machine. Thus, as we argued and as the court decided in this case, Central Mutual Ins. Co. v. Tracy’s Treasures, Inc., No. 07 CH 14995 (Ill. Cir. Ct. Cook Co. Sept. 12, 2012), damages under the TCPA are a penalty to the sender – and are not insurable under Illinois law.
