Columbia Casualty Co. v. Hiar Holding, L.L.C.
2013 Mo. LEXIS 49
| Mo. | 2013Background
- HIAR Holdings sent ~12,500 unsolicited advertising fax ads in 2001; about 10,000 were received and a TCPA class action followed seeking statutory damages per fax.
- Columbia Casualty issued HIAR a commercial general liability policy covering “property damage” and “advertising injury”; HIAR tendered defense but Columbia refused to defend or participate in settlement negotiations.
- HIAR defended the case itself and settled the class for $5 million (later reported with interest to total ~$8.4M); the trial court held a fairness hearing and approved the settlement, and HIAR assigned its rights against Columbia to the class.
- The class brought garnishment against Columbia; Columbia sought declaratory relief contending policy exclusions (penalties/fines, intentional acts, contractual liability, notice/cooperation failures) precluded coverage and indemnity.
- The trial court found Columbia had wrongfully refused to defend, that policy coverage for advertising injury and property damage applied (TCPA damages are not penalties), and entered judgment requiring Columbia to indemnify the settlement plus interest.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Duty to defend and effect of wrongful refusal | Columbia’s wrongful refusal to defend makes it liable for the underlying judgment as damages stemming from the breach. | Columbia denies duty to defend because TCPA claims are outside policy coverage. | Court: Insurer who wrongfully refuses to defend is bound by a court-approved judgment; Schmitz controls — Columbia liable. |
| Nature of TCPA statutory damages (damages vs. penalties) | TCPA $500 per fax is compensatory/liquidated damages for actual, hard-to-quantify harms and thus fits policy “damages.” | TCPA statutory award is a penalty/fine and therefore not within ordinary meaning of “damages.” | Court: TCPA statutory damages are not penalties for insurance coverage purposes; Farmland distinguished and Eighth Circuit reasoning persuasive. |
| Applicability of specific policy coverages (advertising injury / property damage) | TCPA claims allege privacy invasion and business interference falling within “advertising injury” and property-damage-related coverage; insured lacked intent to cause harm. | Columbia: sending faxes was intentional (not an “occurrence”), triggers expected/intended injury exclusion; advertising-injury/privacy language doesn’t cover TCPA claims. | Court: Factual record supports absence of intent to injure; reasonable interpretation includes advertising-injury and property-damage coverage; exclusions do not apply. |
| Reasonableness of settlement / right to relitigate amount | Settlement was judicially approved after a hearing; relitigation barred because Columbia refused to defend. | Columbia sought a second reasonableness hearing to challenge the settlement amount. | Court: Where court held a reasonableness hearing and insurer wrongfully refused defense, insurer cannot relitigate reasonableness. |
| Policy limits/extra-contractual damages & joinder of excess insurer | Class/HIAR seek indemnity for full judgment resulting from insurer’s breach; adding excess insurer unnecessary to adjudicate Columbia’s liability. | Columbia argues indemnity limited to policy limits, any excess exposure is extra-contractual and the excess insurer should be joined. | Court: Columbia’s wrongful refusal exposes it to indemnify the judgment as damages from the breach; trial court did not abuse discretion refusing to add excess insurer. |
Key Cases Cited
- Schmitz v. Great Am. Assurance Co., 337 S.W.3d 700 (Mo. banc 2011) (insurer who wrongfully refuses to defend is bound by litigation results and cannot relitigate reasonableness of court-approved settlement)
- Gulf Ins. Co. v. Noble Broad. Co., 986 S.W.2d 810 (Mo. banc 1997) (insurer entitled to reasonableness hearing when settlement has not been judicially approved)
- Farmland Indus., Inc. v. Republic Ins. Co., 941 S.W.2d 505 (Mo. banc 1997) (ordinary meaning of “damages” excludes fines and penalties)
- Universal Underwriters Ins. Co. v. Lou Fusz Auto. Network, Inc., 401 F.3d 876 (8th Cir. 2005) (TCPA statutory damages serve remedial, compensatory purposes and can trigger coverage)
- McCormack Baron Mgmt. Servs., Inc. v. Am. Guarantee & Liab. Ins. Co., 989 S.W.2d 168 (Mo. banc 1999) (duty to defend arises when complaint alleges a claim potentially within policy coverage)