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National Union Fire Insurance Company of Pittsburgh v. DISH Network, LLC.

No. 20-1215.  D.Colo. Judge Matheson. Declaratory Judgment Action—Disputed Policy Provision—Telephone Consumer Protection Act—Statutory Penalties—Prospective Relief—Fed. R. Civ. P. 56(d)—Motion for Certification to Colorado Supreme Court.

November 1, 2021

DISH Network, LLC (DISH) sells satellite television programming to consumers throughout the United States. Its authorized dealers market its services through a variety of methods, including telemarketing. National Union Fire Insurance Company of Pittsburgh, Pennsylvania (National Union) issued seven commercial umbrella policies to DISH between 2003 and 2010. In 2009, the United States and four states sued DISH in the US District Court for the Central District of Illinois, alleging that its telemarketing practices violated the Telephone Consumer Protection Act (TCPA). The lawsuit sought statutory damages of $500 for each violation, statutory damages of $1,500 for each violation of the TCPA found to have been committed willfully and knowingly, and a permanent injunction to prevent future violations of the TCPA and relevant state law.

DISH submitted a claim for defense and indemnity to National Union under the 2003 and 2004 policies. National Union denied the claim and filed suit in the US District Court for the District of Colorado seeking a declaration that it had no duty to defend or indemnify defendant in the underlying TCPA lawsuit. DISH counterclaimed for breach of contract. The district court granted summary judgment to National Union, holding that it had no obligation to defend or, by extension, to indemnify DISH in the telemarketing lawsuit. The district court also denied DISH’s request for further discovery under Fed. R. Civ. P. 56(d).

On appeal, the Tenth Circuit applied Colorado substantive law because federal jurisdiction in this case is based on diversity of citizenship. Colorado courts have held that an insurer’s duty to defend arises solely from the complaint in the underlying action. The duty is broader than the duty to indemnify, which depends on the ultimate determination of coverage as decided by the trier of fact. To defeat a duty to defend, an insurer must establish that there is not a factual or legal basis on which the insurer might eventually be held liable to indemnify the insured. Here, National Union had no duty to defend DISH against a claim for TCPA statutory damages because those damages are a penalty under Colorado law and thus uninsurable as a matter of Colorado public policy, which prohibits insuring intentional or willful wrongful acts. Further, the policies did not cover the costs of preventing future harms, so National Union had no duty to defend against claims for prospective injunctive relief. Alternatively, National Union had no duty to defend DISH because the telemarketing complaint did not allege a covered injury.

DISH also appealed the district court’s denial of its request for additional discovery under Rule 56(d). Here, the district court resolved the duty-to-defend issue based on the plain meaning of the relevant policy provisions. It decided a pure question of law, so no discovery was needed, and the district court did not abuse its discretion.

Lastly, the Tenth Circuit denied DISH’s motion for certification of a question of law to the Colorado Supreme Court because the question is not novel or uncertain.

The judgment was affirmed.

Official US Court of Appeals for the Tenth Circuit proceedings can be found at the US Court of Appeals for the Tenth Circuit website.

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