A New York-based company recently agreed to pay $10,000 in a suit alleging violations of the TCPA – plus any available insurance coverage up to a total of $10 million.

A Aventura Chiropractic Center filed a class action suit under the TCPA after it received a faxed advertisement from Med Waste Management offering a “Guaranteed 20% Savings” that did not contain the clear and conspicuous notice required under the statute and FCC regulations.

After a Florida federal court judge certified a class of the potential 20,000 recipients of Med Waste’s faxes, the parties reached an agreement.

The terms of the settlement provide for Med Waste to pay the class $10,000, but that the court enter judgment in the total amount of $10 million. Under the TCPA, statutory damages of $500 per fax would result in an award of at least $10 million for the estimated 20,000 faxes at issue. While the statute allows for trebled damages – potentially increasing an award to $30 million – the agreed-upon $10 million “is within the range of possible approval,” the parties wrote in a motion for preliminary approval of the deal.

Because Med Waste said it is unable to pay any more than $10,000 except through its insurance policy, the class agreed to a covenant not to execute against the defendant and its assets. Instead, the plaintiffs will seek recovery to satisfy the remainder of the judgment against Med Waste’s insurer, the James River Insurance Company (James River), which insured the company under a commercial general liability policy during the relevant time period. Defendants had promptly tendered notice of the suit to James River, but James River had denied coverage and refused to defend the litigation.

The agreement not to execute against the defendants remains in place “even if a determination is made that James River does not owe defense or indemnity coverage for the claims alleged in the litigation.”

“Further litigation of the underlying claims against defendants in this court, on appeal, or in bankruptcy will be expensive for the class and will not move the class members closer to collecting any money,” the parties wrote. “On the other hand, if this action is settled, the class can concentrate the efforts on seeking recovery from James River. The settlement should be preliminarily approved because it will minimize the inevitable costs of future litigation of this matter.” To read the parties’ motion in support of preliminary approval of the settlement in A Aventura Chiropractic Center, Inc. v. Med Waste Management, click here.

Why it matters: If approved, the settlement will shift the focus of the litigation from a TCPA action to an insurance recovery fight. Med Waste averred that it provided prompt and correct notice of the suit to James River and case law is on its side. Several courts have recently addressed the issue of whether TCPA damages are insurable, and policyholders won coverage in the 8th and 11th U.S. Circuit Courts of Appeals, federal courts in Massachusetts and Ohio, the Illinois Supreme Court, and the Missouri Supreme Court.