On July 10, 2013, the Eastern District of Missouri Federal District Court refused to allow a class action plaintiff to directly access the defendant’s insurance coverage for plaintiff’s Telephone Consumer Protection Act (TCPA) claims while the TCPA class action lawsuit remained pending Evanston Insurance Company v. Harris Medical Associates, LLC, and St. Louis Heart Center, Inc., case no. 4:12CV1646 JCH (July 10, 2013).

In July 2012, St. Louis Heart Center (St. Louis Heart) filed a class action suit against Harris Medical Associates (Harris), a healthcare staffing firm, alleging that Harris violated the TCPA by sending unsolicited junk faxes, beginning in January 2011, to St. Louis Heart and other putative class members.  That case was filed in state court but was removed to federal court.

Evanston Insurance Company (Evanston) had issued a general liability policy to Harris, effective from May 1, 2012 through May 1, 2013.  Harris’s prior policies with Evanston did not contain general liability coverage.  The Evanston general liability policy contained two different coverages: Coverage A, which provided coverage for Bodily Injury and Property Damage Liability, and Coverage B, which covered Personal and Advertising Injury Liability.  The Insuring Agreement for Coverage B stated: “[Evanston] shall pay on behalf of [Harris] all sums … which [Harris] shall become legally obligated to pay as Damages as a result of Claims made against [Harris] … for Personal and Advertising Injury caused by an offense provided: 1. the entirety of the Personal and Advertising Injury and offense happens during the Policy Period; …”  Both Coverage A and B were subject to an exclusion for any claim “based upon or arising out of any violation of the [TCPA and] …. any other statute, law, rule, ordinance or regulation that prohibits or limits the sending, transmitting, communication or distribution of other material.”

In September 2012, several months after St. Louis Heart filed its TCPA class action case against Harris, Evanston commenced a declaratory judgment action against both Harris and St. Louis Heart, alleging that it had no duty to defend or indemnify Harris under the general liability policy.  In addition to relying on the TCPA exclusion, Evanston asserted that there was no coverage because Harris allegedly began sending faxes to St. Louis Heart prior to the inception of the general liability policy.  Evanston also alleged that the faxes did not violate a “person’s” right of privacy or privacy right of secrecy, since St. Louis Heart is a corporation.  Evanston further alleged that TCPA statutory damages do not constitute “damages” under the policy, which does not include “punitive or exemplary damages or multiplied portions of damages in excess of actual damages … criminal or civil fines, restitution of attorney’s fees of a party other than an Insured or penalties imposed by law….”

Even though the underlying case between St. Louis Heart and Harris was still pending, St. Louis Heart filed a counterclaim against Evanston in the coverage action, seeking a declaration that Evanston’s coverage is triggered by both the “property damage” and “advertising injury” provisions of the policy. In response, Evanston filed a motion to dismiss on the threshold issue that St. Louis Heart did not have standing to seek a declaratory judgment against Evanton based on its insurance contract with Harris.

The Missouri Declaratory Judgment Act provides: “Any person interested under a … written contract …, or whose rights, status or legal relations are affected by a … contract…, may have determined any question of construction or validity arising under the …. contract, …. and obtain a declaration of rights, status or other legal relations thereunder.”    The District Court noted that the Missouri Court of Appeals has held that a claimant who is not a party to or third party beneficiary of the insurance contract “has no standing to maintain a direct action for declaratory judgment against [an insurance company].  The only exception to this rule is where the liability of the insured to pay an injured party has been established by judgment or written agreement among the injured party, the insured and the insurer, in which case a declaratory judgment action in the nature of an equitable garnishment action may be maintained.”

Here, St. Louis Heart failed to establish that it was party to or third party beneficiary of the insurance contract between Evanston and Harris.  In addition, St. Louis Heart had not obtained a judgment against Harris nor secured an agreement between itself, Harris and Evanston establishing Harris’s liability.  Therefore, the District Court held that St. Louis Heart lacked standing to pursue a direct insurance claim against Evanston, and the counterclaim was dismissed.

In the absence of a statute permitting a direct action by an injured party against the tortfeasor’s insurer, courts routinely find that there is no common law basis on which to sue the insurer prior to the establishment of the insured’s liability.