Insurance companies refuse to pay for “knowing violations”

Change of Pace

Normally, we’d be writing about In Re Monitronics International, Inc., a multidistrict Telephone Consumer Protection Act (TCPA) litigation in the Northern District of West Virginia. In that case,the company was sued for vicarious liability under the TCPA for failing to stop dealers from placing autodialed calls with prerecorded messages to Do Not Call registry-listed numbers on its behalf. The parties reached a settlement in June 2017, with the company agreeing to pay $28 million to the plaintiffs, and the court entered its final approval order and judgment in June.

But that’s not the interesting part.

The Twist

The novel aspect of this lawsuit (for the purposes of this column, at least), is the follow-on suit that was launched by Monitronics against its insurers in the Northern District of Texas in early August.

Monitronics claims that its insurers – named defendants Everest Indemnity Insurance, Navigators Specialty Insurance and Axis Surplus Insurance – were required by their policies to indemnify the company but never paid up.

Monitronics is appealing the June 2018 final approval order. While it deposited $5 million into the settlement fund’s account as required by the agreement, the remainder of the $28 million will be due within 10 business days after the appeal is dismissed or the judgment is affirmed, and the time for review of that order has run. It’s that payment that Monitronics wants its insurers to make.

The Takeaway

The suit alleges that the three insurance companies wrongfully cite several policy exclusions in an attempt to wiggle free of the obligations. Some have to do with quotidian matters, like whether the loss fell within the coverage period of the policy.

But Everest Indemnity claims that it is exempted from covering the fee because it is not obligated to pay if the underlying injury was a “knowing violation of the rights of another.” Axis claimed that it did not have to pay because it was exempted from covering damages arising from “false, misleading, deceptive, fraudulent or misrepresenting statements in Advertising.”

While the suit doesn’t openly assert it, a key line of dispute will likely be that the insurers should pay under the policy because Monitronics did not knowingly violate the TCPA or any other law when the autodialers made the calls. As TCPA class actions continue to be filed, it will be interesting to see how this coverage dispute plays out.