10th Cir. Says TCPA Penalties Are Not Insurable Damages

DISH’s first contention on appeal is that the district court erred in concluding the TCPA statutory damages for non-willful violations are penal under Colorado law because they represent liquidated damages, not punitive damages. Alternatively, DISH argues that even if the TCPA damages were a penalty, coverage would still apply because ACE did not exclude penalties from coverage. We conclude 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 Colorado Supreme Court has held that Colorado public policy prohibits “insuring intentional or willful wrongful acts.” Bohrer v. Church Mut. Ins. Co., 965 P.2d 1258, 1262 (Colo. 1998). “The purpose of the exclusion of intentional injuries from coverage is to prevent extending to the insured a license to commit harmful, wanton or malicious acts.” Am. Family Mut. Ins. Co. v. Johnson, 816 P.2d 952, 957 (Colo. 1991). . . . In Kruse, the Colorado Supreme Court considered whether the statutory damages available under the TCPA are assignable, or whether they are instead unassignable penalties. . . .The Colorado Supreme Court determined that a claim for either non-willful or willful statutory damages under the TCPA is a claim for a penalty because the TCPA created a new and distinct cause of action, did not require proof of injury, and allowed damage awards that would always be greater than any actual damage suffered.  DISH argues the Kruse test applies only when determining whether a statute is penal for purposes of assignability and should not be applied in the context of determining insurance coverage . . . . .  In T2 Techs., the Colorado Court of Appeals acknowledged that “courts in other jurisdictions have held that the TCPA is not a penal statute.” 183 P.3d at 646. But it nevertheless held that even if the TCPA “affords remedial remedies that might be assignable in other circumstances,” the “sums sought by the plaintiff in this action [willful and non-willful statutory damages] were penalties and, as such, were not assignable.” Id. at 646–47. That is, Colorado courts focus on the precise TCPA remedy sought by the plaintiff, and where that claim is for statutory damages, the TCPA is treated as penal under Colorado law.    DISH next argues that, even if the TCPA’s provision for willful and non-willful statutory damages is a penal provision, the statute’s provision for actual monetary loss is a remedial provision insurable under Colorado public policy and sufficient to trigger the duty to defend. It is true that “[a] statute can be both penal and remedial in nature.” Front Range Christian Ministries v. Travelers Indem. Co. of Am., No. 16-CV-01923-PAB-CBS, 2017 WL 1148690, at *2 (D. Colo. Mar. 27, 2017) (unpublished) (citing Moeller v. Colo. Real Estate Comm’n, 759 P.2d 697, 701 (Colo. 1988)). Indeed, “[t]he Colorado Supreme Court has distinguished between penal and remedial remedies even when they arise from a single statutory section.” Id. (citing Carlson v. McCoy, 193 Colo. 391, 566 P.2d 1073, 1075 (Colo. 1977)). While “penalties in excess of actual damage are penal” and serve the public interest of deterrence, “recovery of the actual amount” of the damages suffered is remedial. Carlson, 566 P.2d at 1075. “The determination of whether a portion of the statute is penal or remedial depends on the facts of the case.” Front Range Christian Ministries, 2017 WL 1148690, at *2 (citing Moeller, 759 P.2d at 701).  As discussed, when the Colorado Court of Appeals was presented with the argument that the TCPA has both penal and remedial components, the court determined that the actual relief sought by the plaintiffs—the statutory damages permitted by the statute—was penal. T2 Techs., Inc., 183 P.3d at 646–47. So, even assuming the TCPA has remedial components that would be insurable under Colorado law, whether the plaintiffs have alleged any remedial damage is a fact-specific inquiry. DISH contends the State Plaintiffs have alleged remedial damages by asserting in the Underlying Complaint that they were “authorized … to obtain actual damages or damages of $500 for each violation” of the TCPA. Underlying Complaint ¶¶ 5–8, Aplt. App’x at 2028–30. Had the Underlying Complaint requested relief in the same way, DISH’s argument might succeed; however, the prayer for relief specifically asks the court to: Assess against [DISH] and in favor of the State Plaintiffs damages of $1,500 for each violation of the TCPA found by the Court to have been committed by [DISH] willfully and knowingly; if the Court finds [DISH] has engaged in violations of the TCPA which are not willful and knowing, then assessing against [DISH] damages of $500 for each violation of the TCPA….Prayer for Relief ¶ 4, Aplt. App’x at 2051. This request does not ask, even in the alternative, for actual monetary loss. Instead, it explicitly seeks only statutory damages which, under T2 Techs. and Kruse, are not remedial. See also Hannabury, 174 F.Supp.3d at 776 (stating that the plaintiffs’ relief request for $500 in liquidated damages indicates the claim is penal, despite the fact the statute allows the plaintiff to sue for actual damages). . . To be sure, the Colorado Supreme Court may decide, when actually faced with the question, that the TCPA is penal in some contexts, but remedial in others. But, “[a]bsent a strong showing to the contrary, we are disinclined to predict that the [Colorado] Supreme Court would recognize” such a distinction. Belnap, 844 F.3d at 1295.  In sum, 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, ACE has no duty to defend DISH on these claims.