On October 31, 2013, the Northern District of Illinois forced two insurers to cover a $6 million settlement of a TCPA class action despite claims that their insured, M&M Retail Center, Inc., settled for an inflated amount it knew it would never have to pay. Maxum Indemnity Co. v. Eclipse Manufacturing Co., 1:06-cv-04946 (N.D. Ill. Oct. 31, 2013)
In a previous ruling, the Court held that the two insurers, Maxum Indemnity Co. and Security Insurance Co. of Hartford, had the duty to defend M&M in the underlying class action lawsuit. In that case, the class plaintiffs alleged that they received five blast faxes in violation of the TCPA. Copies of the fourth and fifth faxes were produced in the litigation, but no one could locate copies of the first, second, and third faxes and their contents were unknown. So, the court awarded summary judgment to M&M on the first through third faxes and summary judgment to the class plaintiffs on the fourth and fifth faxes for a total of $3,862,500. This amount equals $500 per fax, the liquidated damages amount provided for under the TCPA. The class then filed a motion for reconsideration, asking the court to reconsider its award of summary judgment to M&M for the first, second, and third faxes.
While that motion for reconsideration was pending, the parties participated in a settlement conference and determined that M&M could not pay the $3.86 million judgment and would have to enter bankruptcy if the class pursued it. At that point, both parties understood that the only...
