Treble Damages Not Punitive

A federal statute called the Telephone Consumer Protection Act allows recipients of unsolicited faxes to recover damages of $500 per violation, whether or not the recipient can establish any actual damages. If the fax sender “willfully” violates the act, that award can be tripled. Because we lawyers love to use words that confuse non-lawyers, we refer to this as “treble damages.” If you ever hear a basketball analyst refer to a shot from outside the arc as a “treble,” you can assume he is a law school graduate. But I digress. The law also rarely proceeds in isolation. Collateral issues almost always arise in the litigation arena. The TCPA is no exception. A company called American Home Services found itself a defendant in a lawsuit filed by Fast Sign Company. Fast Sign alleged that American Home had willfully violated the TCPA. American Home demanded that Alea London Limited, its liability insurer, cover the defense and any judgment. Alea tried to limit its coverage obligation to American Home by arguing that the policy excluded coverage for punitive damages, and that the treble damages were punitive. The court disagreed. It noted that the TCPA does not require a finding of malice for the treble damage award. A court typically cannot award punitive damages unless it finds the defendant acted maliciously. The court also noted that Alea could have excluded treble damages had it wanted. Since courts interpret policies against the insurer (bet insurance companies really like that rule) the court found that Alea would need to cover the treble damages. The statutory and treble damages can add up. Ask Hooters, who got hit with a nearly $12 million award a few years back. But you have to wonder, as more and more people scan, and less and less people use the fax machine, how much viability remains for this law.