The Streak Continues: Insurers Again Shut Out of Federal Court in Contesting Coverage for a TCPA Class Action Settlement

The Sixth Circuit ruled sua sponte in Siding and Insulating, Inc. v. Acuity Mutual Insurance Co. (6th Cir. June 10, 2014), that the subject coverage dispute, which arose out of the settlement of an underlying TCPA blast fax suit, did not satisfy the amount in controversy requirement for purposes of diversity jurisdiction.  Following the Seventh Circuit’s recent holding in Travelers Property Casualty v. Good, 689 F.3d 714 (7th Cir. 2012), the Sixth Circuit concluded that the interests of the plaintiff class members could not be aggregated to reach the required $75,000 amount in controversy.  Further, the court rejected the parties’ argument that the plaintiff class members share a common, united, and undivided interest in the insurance proceeds at issue.  The court similarly rejected that the coverage dispute could be viewed from Acuity’s perspective, i.e., that it has the policy limits ($2 million) at stake.

Insurers should be wary of these two decisions, as they have great significance for coverage disputes flowing from class actions involving statutory damages.  To avoid having to litigate in state court coverage for multi-million dollar settlements flowing therefrom, insurers should consider initiating coverage litigation early in the claims process and not wait until after a settlement has been reached.