Standard Mut. Ins. Co. v. Lay
Annotate this CaseLay, a real estate company, hired a business to send advertising faxes on its behalf by “blast fax,” which sends advertisements to thousands of fax machines cheaply. As a result, Lay became the defendant in a class action filed by Locklear under the Telephone Consumer Protection Act. The matter settled. A monetary judgment was entered against Lay to be paid only from Lay’s insurance policies. The Act in question provides for $500 in damages for each violation, and, with a putative class of 3,478 in the underlying action, the total damage amount reached $1,737,500, plus costs. Lay’s insurer, Standard, successfully sought a declaration of noncoverage. The appellate court affirmed, reasoning that the damage provision of the Act allows for punitive damages, which are uninsurable under Illinois law as a matter of public policy. The Illinois Supreme Court remanded, reasoning that the Act is a remedial statute, even though it provides for $500 in liquidated damages per violation. The ban on insurability does not apply.
Court Description:
In 2006, Ted Lay Real Estate Agency in Girard, in Macoupin County, hired a business entity to send advertising faxes on its behalf by “blast fax,” which sends advertisements to thousands of fax machines cheaply. As a result of this, Lay became the defendant in a Madison County lawsuit filed as a class action by Locklear Electric, Inc. This suit complained, pursuant to a federal enactment known as the Telephone Consumer Protection Act, or TCPA, of the receipt of unsolicited faxes. Ultimately, the mater was settled, with judicial approval, after the cause was moved to federal district court. A monetary judgment was entered against Lay to be paid only from Lay’s insurance policies. The Act in question provides for $500 in damages for each violation, and, with a putative class of 3,478 in the underlying action, the total damage amount reached $1,737,500, plus costs.
Lay’s insurer is Standard Mutual Insurance Company, the plaintiff in this 2010 Macoupin County lawsuit. Standard sought a declaration of noncoverage, and was successful in the circuit and appellate courts. Lockyear appealed to the Illinois Supreme Court.
A number of theories were asserted in this lawsuit, but the appellate court relied on the issue of punitive damages. That court held that the $500-per-violation damage provision of the Act allows for punitive damages, which are uninsurable under Illinois law as a matter of public policy. Although some other courts have held otherwise, the supreme court, in this decision, reached a different conclusion than the appellate court. It held that the Telephone Consumer Protection Act is a remedial statute, even though it provides for $500 in liquidated damages per violation. Therefore, the ban on insurability does not apply.
Other arguments had been raised which the appellate court did not reach. The cause was remanded there so that it could do so.
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