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Chubb unit not obligated to pay Dish penalties

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Chubb unit not obligated to pay Dish penalties

A Chubb Ltd. unit is not obligated to pay penalties Dish Network L.L.C. incurred because of alleged violations of the Telephone Consumer Protection Act because they are not “damages” covered under its insurance policies, says a federal appeals court, in affirming a lower court ruling.

In April 2009, the federal government and California, Illinois, North Carolina and Ohio sued Englewood, Colorado-based Dish Network L.L.C. alleging violations of the Telemarketing Sales Rule, the TCPA and a variety of state laws, according to Wednesday’s ruling by the 10th U.S. Circuit Court of Appeals in Denver in ACE American Insurance Co. v. Dish Network, L.L.C.

In the lawsuit filed against Dish, state plaintiffs seek damages of $1,500 for each violation committed “willfully and knowingly” and $500 for those committed unwillfully or unknowingly.

DISH sought coverage from Philadelphia-based Chubb Ltd. unit ACE American, which initially issued Dish a check for $913,650 in December 2013, according to the ruling.

It later reversed its decision, however, and filed suit in U.S. District Court in Denver seeking a declaratory judgment it did not have a duty to defend or indemnify Dish in the underlying lawsuit.

The U.S. District Court ruled in ACE’s favor, holding the TCPA statutory damages were a penalty and therefore uninsurable under its coverage.

A unanimous three-judge appeals court panel agreed. “The primary question is whether statutory damages and injunctive relief under the Telephone Consumer Protection Act are ‘damages’ under the insurance policies at issue and insurable under Colorado law, or are uninsurable ‘penalties,’” said the ruling.

“We conclude 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,” said the ruling, in upholding the lower court’s decision.

 

 

 

 

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