A threshold– and critical– determination in the defense of litigation brought pursuant to the Telephone Consumer Protection Act, 47 U.S.C. Sec. 227 et seq. (“TCPA” or “Act”) is whether an insurance policy provides coverage of the allegations set forth in the Complaint.  In a recent decision by the Missouri Supreme Court in Columbia Casualty Company v. Hiar Holding, L.L.C., SC 93026, the Court sent a loud warning to insurance companies to carefully undertake the determination of whether to provide defense and coverage in TCPA litigation, affirming the trial court’s determination that Columbia Casualty Company (“Columbia”) must indemnify Hiar Holdings, L.L.C. (“Hiar”)  for the entire $5 million settlement, $3 million beyond the policy coverage limits.

Factual Background

The TCPA allows for a private right of action for recipients of unsolicited communications sent through the use of automatic dialers, or that may otherwise violate the Act.  47 U.S.C. Sec.  227(b)(3).  A recipient may bring an action to recover $500 per violation, as well as treble damages for willful violations of the Act.  Id.  Hiar, a hotel proprietor, used a marketing service to send approximately 12,500 unsolicited facsimiles to individuals in the St. Louis area, and, in 2003,  Karen S. Little LLC brought a class action suit seeking recovery on behalf of the class.  Opinion, pg. 3.  At the time, Hiar was insured under a commercial general liability policy from Columbia, which provided coverage for both property damage and advertising injury.  Id.  Pursuant to the policy, Hiar tendered defense of the suit to Columbia, which denied coverage. Id.  In March 2005, the plaintiff made a settlement offer within the $2 million policy limits.  Hiar forwarded the demand to Columbia, which again refused to defend or cover the claim, and further indicated its refusal to participate in any further settlement negotiations. Id.   In January 2007, after having defended the suit at its own expense, Hiar agreed to a class-wide settlement of $5 million.  Id.  The settlement was approved by the trial court after an evidentiary hearing, judgment was entered and the Court approved the assignment by Hiar of any claim to insurance proceeeds to the class.  Id. at 4.   Thereafter, the class brought a garnishment action against Columbia, alleging that the policy provided for coverage for both “property damage” and “advertising injury.”  Columbia objected and filed a declaratory action seeking clarification of its obligations under its policy.  Id.

The Trial Court’s Decision

Relying upon the Missouri Supreme Court’s decision in Schmitz v. Great American Assurance Co., 337 S.W.3d 700 (Mo. 2011) (en banc), the trial court held that where an insurer wrongfully refuses to defend, it cannot later litigate the reasonableness of an indemnification amount, and therefore becomes liable for the entire underlying judgment.  The court determined that Columbia had acted unreasonably and in bad faith in handling the Hiar claim for coverage under the TCPA, and reiterated that because the court had determined the settlement to reasonable and negotiated in good faith, Columbia could not now relitigate that issue.  The court further refused to allow Columbia to add the excess insurer to the litigation, and denied Columbia’s motion to amend or reconsider its judgment.  Columbia subsequently appealed.

The Missouri Supreme Court Decision

In reviewing the applicability of the Schmitz decision, the Court reinforced the long-standing principle that where a “complaint merely alleges facts that give rise to a claim potentially within the policy’s coverage, the insurer has a duty to defend.”  Id. at 8, n. 10.   Further, the Court reiterated that an insurer “cannot have its cake and eat it too by both refusing coverage and at the same time continuing to control the terms of the settlement in defense of an action it had refused to defend.”  Id. at 8.    Similar to a recent argument made, and rejected, before the Illinois Supreme Court (See Std. Mut. Ins. Co. v. Lay, 2013 IL 114617 (Ill. 2013). and our previous client alert here.), Columbia argued that the $500 statutory damages amount was a penalty, not damage, as contemplated by the policy.  At the time, Columbia’s position would not have seen outrageous, as the Missouri appellate court had held just that in Olsen v. Siddiqi, 371 S.W.3d 93 (Mo. App. 2012).  However, the Court rejected the Olsen decision, finding that it was incongruous with the Eight Circuit’s decision in Universal Underwriters Insurance Co. v. Lou Fusz Automotive Network. Inc., which determined that the $500-per-occurence award was simply not a “penalty.”  401 F.3d 876 (8th Cir. 2005).   The Court continued, determining that the sending of the fax constituted both “property damage,” as it was not done intentionally, but negligently, and “advertising injury,” as the policy was not precise enough in precluding claims for a violation of privacy rights. Id. at 14-16.   Columbia further argued that Hiar did not cooperate, as required under the policy, and therefore this “vitiated coverage.”  Id. at 18.  The Court likewise rejected this argument, holding that as Columbia “sought to be wholly unconnected from the proceedings,” it could not now seek to use that disconnectiveness to bar coverage. Id. at 20.  Finally, the Court rejected Columbia’s attempt to limit its indemnification obligations to the policy limits.  In so doing, the Court noted that its liability is not bound by the limits of the policy; rather, Columbia is “suffering the consequences of its breach of its duty to defend and its failure to settle within its policy limits.”  Id. at 22.  The Court ultimately upheld the trial court’s judgment against Columbia in the entire amount of the class settlement– $5 million.


The Hiar decision should raise a flag for lawyers, litigants and insurance companies.  The decision raises a panoply of pitfalls for each group.  It does, however, provide both guidance and advise to each group on how best to deal with actions brought under the TCPA.   We would expect Columbia will challenge this decision, and, if so, will continue to track this, and other, relevant TCPA decisions across the country.