A District Court judge in Colorado has ruled that an insurance company does not have to cover customers that were found liable for using a faulty debt collection letter, because of a provision in the agreement that excluded coverage in the event that material was published with a “knowledge of falsity.”
A copy of the ruling in the case of New Hampshire Insurance Company et al. v. TSG Ski & Golf et al. can be accessed by clicking here.
The insurance companies allege that homeowner’s associations circulated debt collection letters stating that $15.5 million in unpaid assessments were owed, which failed to acknowledge that the assessments had been paid and that the authors of the letter knew the calculation of the unpaid assessments was false and misleading, while also including false and misleading statements to coerce payments that were not owed. A trial was held and the defendants were found liable and ordered to pay $225,000 in damages.
The insurance companies filed their lawsuit, seeking a declaratory judgment that they were not required to indemnify the defendants because they had advised them that this was not a covered claim.
While acknowledging that the facts adequately establish claims under the “personal and advertising injury” portion of the insurance agreement, the plaintiffs argue that the knowledge of falsity exclusions should apply, because the defendants knowingly made a false statement in the letter.
The defendants put forth a number of arguments attempting to convince Judge Christine M. Arguello of the District Court for the District of Colorado that they did not know the information included in the letters was false, but had no luck doing so and she granted the plaintiff’s motion for summary judgment and ordering the defendants to reimburse the insurance company for what it paid to defend the underlying lawsuit.
