Appeals Court Upholds Ruling for Insurance Company Against Debt Collector

A ruling that should have every debt collector going through their insurance policies to make sure they have the proper coverage …

The Court of Appeals for the Eighth Circuit has affirmed a lower court’s ruling in favor of an insurance company that was being sued by a law firm that was accused of violating the Fair Debt Collection Practices Act, ruling that the policy the law firm obtained did not cover it from the allegations made by a consumer who sued the firm.

A copy of the ruling in the case of Rodenburg v. The Cincinnati Insurance Company can be accessed by clicking here.

The law firm obtained a default judgment against an individual named Charlene Williams. It attempted to serve a notice of intent to garnish her wages at the residential address it had for her, but was not answered. The firm then served her employer with a notice. Williams contacted the firm to indicate she was not the same Charlene Williams that the firm had obtained the default judgment against. The firm allegedly ignored that information and proceeded to garnish her wages for six weeks. At that point, a lawyer contacted the firm and informed it that it had the wrong Charlene Williams, at which point the garnishment was stopped and the garnished funds were returned.

Williams filed suit against the firm, alleging it violated several provisions of the FDCPA.

The firm filed a claim with its insurance company, seeking coverage of the lawsuit filed by Williams. The insurance company denied the claim, at which point the firm settled with Williams. The firm then sued the insurance company, saying it had breached its agreement by not covering it in the lawsuit. A District Court judge ruled in favor of the insurance company, ruling that some of the firm’s conduct was outside the scope of the behaviors covered in the insurance agreement and that the insurance company had no duty to defend the firm.

The insurance company had a duty to defend the firm if Williams had alleged either “bodily injury” or “personal or advertising injury” that was “caused by an occurrence.” The issue in this case was whether the injuries suffered by Williams were “caused by an occurrence.”

After first ruling that actions of the law firm met the definition of “occurrence” that was in the original agreement, the Appeals Court then turned to the exclusions listed in the agreement. The exclusions included “Any liability arising directly or indirectly out of any action or omission that violates or is alleged to violate … Any statute, ordinance or regulation, other than the TCPA or CAN-SPAM Act of 2003, that prohibits or limits the sending, transmitting, communicating or distribution of material or information.”

Given the language in the exclusion provision — even if it might exclude coverage from FDCPA liability — the insurance firm was not obligated to cover the law firm, the Eighth Circuit ruled.

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