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High Court Rules Insurance Must Cover Telephone Consumer Protection Act Judgment - Standard Mutual Insurance Co. v. Lay

June 10, 2013

Vincent Howard and our Riverside County consumer protection lawyers were interested to see a case applying the Telephone Consumer Protection Act to "spam" faxes. Like other forms of spam, unwanted advertisements sent via fax cost the recipient money and are annoying. They also fall under the TCPA, which bans unsolicited faxes altogether unless there is an existing business relationship between sender and receiver. That was bad news for the real estate agent in Standard Mutual Insurance Co. v. Lay, a decision of the Illinois Supreme Court. One of the recipients of an unsolicited fax from Ted Lay Real Estate Agency successfully sued Lay for TCPA violations, resulting in a settlement for $1.73 million in damages. Lay's insurer sued for a declaration of no coverage and got it at the trial court level, but the Illinois Supreme Court reversed.

In 2006, Lay hired Business to Business Solutions to advertise a commercial property for sale via fax. Unbeknownst to him, B2B did not have permission to send faxes to the recipients, and one recipient, Locklear Electric, filed a class action lawsuit under the TCPA. That case settled for $1,737,500, money to be paid only out of Lay's insurance policy. Ted Lay died during the pendency of this case, but his wife and estate were substituted as defendants. They assigned the right to seek payment from Standard to Locklear, the lead plaintiff. Meanwhile, Standard filed a separate case seeking a declaration that no insurance coverage was required, alleging among other things that TCPA damages are punitive damages not insurable under Illinois law. The circuit court granted summary judgment and the appeals court affirmed.

The Illinois Supreme Court reversed that decision, finding that TCPA damages are not punitive, but remedial. It first rejected an argument by Locklear (standing in Lay's shoes for recovery purposes) that Standard should be estopped from disputing coverage because it didn't adequately inform Lay of conflicts of interests. Locklear had better luck arguing that TCPA damages are insurable in Illinois. The appellate court ruled otherwise, saying the TCPA was penal because the statutory damages are effectively automatic, since actual damages are likely to be small. The Illinois high court disagreed, saying the statute was clearly designed to be remedial and the damages are not purely punitive, but also incentivize private parties to sue. Because the appellate court found this issue dispositive, the high court remanded the case there for consideration of Locklear's other arguments.

Vincent Howard and our Anaheim consumer protection attorneys strongly agree with this logic. Class action lawsuits in general exist because the damages to any one consumer for certain kinds of law-breaking are small. It's only by banding together that consumers can recover enough money to make a lawsuit worth an attorney's time. Liquidated damages under the TCPA and similar statutes (such as the Fair Debt Collection Practices Act) serve a similar goal by creating enough damages to pay an attorney. In a TCPA case, damages are per call or per page of junk fax, which (as this case shows) quickly adds up. Vincent Howard and our Rancho Cucamonga consumer protection lawyers believe this provides a strong incentive for telemarketers to follow the law.

If you have been slammed with junk faxes or repeat telemarketing calls and you'd like to fight back, Howard Law, P.C., can help. To tell us your story or learn more, you can reach us online or call 1-800-872-5925 today.

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