Insured need not obtain insurer consent for settlement to be covered.

The Illinois Fourth District Court of Appeals held an insurer liable for a $1,739,000 settlement in a TCPA (“blast fax”) action. This case was on remand from the Illinois Supreme Court which had previously overturned the court’s original finding that TCPA damages were punitive and, thus, not insurable. The policies did not contain a TCPA exclusion, but they did contain other exclusions that the insurer argued barred coverage. For example, the court acknowledged the “intentional acts” exclusion, but it characterized the policyholder’s actions as negligent because the policyholder was told by a third-party that the recipients had consented to receiving the faxes. The court found that the advertising injury sections provided coverage because the faxes were sent without consent, violating the recipients’ privacy rights. The court also held that a “professional services” exclusion did not apply because the claims were not related to the policyholder’s real estate service performance. The insurer still disputed the settlement because “independent counsel” hired by the policyholder had undertaken control of the defense. The appellate court found that the insurer had given up its right to control the settlement. Absent prejudice to the insurer, the settlement accorded with the mathematical likelihood of the policyholder’s liability under the TCPA ($500 per offending fax). The Court did express concern that permitting insurance coverage for such abuses creates a disincentive to cease the abuses the TCPA was meant to address. Standard Mut. Ins. Co. v. Norma Lay, et al., No. 4-11-0527 (Ill. App. Ct. Jan. 23, 2014).