Alea London Limited vs America Home Services, Inc.

[PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT FILED
________________________ U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
APRIL 13, 2011
No. 10-11644
JOHN LEY
________________________ CLERK

D.C. Docket No. 1:09-cv-00158-TCB

ALEA LONDON LIMITED,

lllllllllllllllllllPlaintiff-Appellee,

versus

AMERICAN HOME SERVICES, INC.,
a.k.a. A.H.S., Inc.,

llllllllllllllllllllllDefendant,

A FAST SIGN COMPANY, INC.,
d/b/a Fastsigns on behalf of That Certain Class Certified
by the September 21, 2006 Order of the Fulton County, GA
Superior Court in Case No. 2003-CV-77276,

Defendant-Appellant.
 ________________________

No. 10-11645
________________________

D.C. Docket No. 1:09-cv-00158-TCB

ALEA LONDON LIMITED,

lllllllllllllllllllPlaintiff-Appellee,

versus

AMERICAN HOME SERVICES, INC.,
a.k.a. A.H.S., Inc.,

llllllllllllllllllllllDefendant-Appellant,

A FAST SIGN COMPANY, INC.,
d.b.a. Fastsigns on behalf of That Certain Class Certified
by the September 21, 2006 Order of the Fulton County, GA
Superior Court in Case No. 2003-CV-77276 doing business as Fastsigns,

Defendant.

________________________

Appeals from the United States District Court
for the Northern District of Georgia
________________________

(April 13, 2011)

2
Before HULL and BLACK, Circuit Judges, and HOWARD,* District Judge.

HULL, Circuit Judge:

Plaintiff-Appellee Alea London Limited (“Alea” or “the insurer”) filed this

declaratory judgment action, alleging it had no duty to defend or indemnify its

insured, defendant American Home Services, Inc. (“AHS” or “the insured”), in

state court litigation brought by A Fast Sign Company, Inc. (“FastSigns”). In the

state lawsuit, FastSigns sued the insured, AHS, for sending unsolicited faxes in

violation of the Telephone Consumer Protection Act of 1991 (“TCPA”).

In its summary judgment rulings, the district court concluded, inter alia, that

(1) the insurer Alea had a duty to defend and indemnify AHS in the state lawsuit;

(2) the $500 per-claimant deductible in the Alea policy applied to coverage for

AHS’s “advertising injury” liability; (3) the punitive damages exclusion in the

Alea policy applied to any treble damages awarded against AHS under the TCPA;

and (4) the Alea policy covered costs but not attorneys’ fees awarded against AHS

in the state lawsuit. Both the insured AHS and FastSigns appeal the lack-of-

coverage rulings as to punitive damages and attorneys’ fees. AHS appeals the

ruling as to the $500 per-claimant deductible.

*
The Honorable Marcia Morales Howard, United States District Judge for the Middle
District of Florida, sitting by designation.

3
 After review of the record and the briefs, and with the benefit of oral

argument, we affirm in part and reverse in part.

I. FACTUAL AND PROCEDURAL BACKGROUND

From July 17, 2002, to July 17, 2003, AHS was the named insured on a

commercial general liability insurance policy (the “Policy”) issued by Alea. The

Policy covers sums AHS must pay because of “advertising injury,” defined as

follows:

Coverage B. Personal and Advertising Injury Liability
1. Insuring Agreement
a. We will pay those sums that the insured becomes legally obligated to
pay as damages because of personal injury or advertising injury to which
this insurance applies. We will have the right and duty to defend any
suit seeking those damages. . . .
....
Section V– Definitions
1. Advertising injury means injury arising out of one or more of the following
offenses:
a. Oral or written publication of material that slanders or libels a person
or organization or disparages a person’s or organization’s goods,
products or services;
b. Oral or written publication of material that violates a person’s right
of privacy;
c. Misappropriation of advertising ideas or style of doing business; or
d. Infringement of copyright, title or slogan.[1]

(Emphasis added)

1
Coverage A of the Policy provides coverage for Bodily Injury Liability and Property
Damage Liability. Coverage B provides coverage for Personal Injury Liability and Advertising
Injury Liability.

4
A. State Court Litigation

In 2002, the insured AHS began selling and installing windows, siding, and

gutters. AHS hired a third-party marketing firm to send advertisements via fax.

This third-party firm sent approximately 300,000 fax advertisements on AHS’s

behalf, including one to FastSigns in March 2003.

On October 31, 2003, FastSigns filed suit against the insured AHS in

Georgia state court (the “state lawsuit”), alleging that AHS’s fax advertisements

violated the TCPA’s prohibition on “an unsolicited advertisement to a telephone

facsimile machine.” 47 U.S.C. § 227(b)(1)(C).2 The TCPA creates a private right

of action under which a party can bring suit to recover its “actual monetary loss”

or “to receive $500 in damages” per violation, whichever is greater. Id.

§ 227(b)(3)(B). If the violation was willful or knowing, the TCPA allows the

court, in its discretion, to “increase the amount of the award to an amount equal to

not more than 3 times the amount available under subparagraph B” above. Id.

§ 227(b)(3) (emphasis added). The TCPA is unusual because it creates a private

right of action that may be brought in state court only. Nicholson v. Hooters of

2
Section 227 was amended after the events that give rise to the state court litigation.
References to the TCPA in this opinion are to the relevant pre-2005 version of the statute.

5
Augusta, Inc., 136 F.3d 1287, 1287-89 (11th Cir.), modified on reh’g, 140 F.3d

898 (11th Cir. 1998).

In the state lawsuit against the insured AHS, FastSigns asked for class

certification of its TCPA claims, $500 in statutory damages for each violation of

the TCPA, and the TCPA’s statutory trebling of each award for AHS’s “willful or

knowing” violations. FastSigns also sought to recover its expenses of litigation,

including attorneys’ fees, under Georgia law, O.C.G.A § 13-6-11. The state trial

court certified FastSigns’s claims for class adjudication, a decision later upheld on

appeal. Am. Home Servs., Inc. v. A Fast Sign Co., 287 Ga. App. 161 (2007).

At the outset of the state lawsuit, AHS requested that its insurer Alea

provide a defense and indemnify AHS for any damages. Alea hired counsel to

defend AHS under a Bilateral Non-Waiver and Reservation of Rights Agreement.

Alea defended AHS for six years in the state lawsuit.3

B. Federal Declaratory Judgment Action

In 2009, the insurer Alea filed this declaratory judgment action against AHS

and FastSigns, seeking to resolve several substantive issues regarding what AHS’s

3
In the certified class action, the state trial court found that AHS was responsible for
sending 306,000 unsolicited faxes in violation of the TCPA. On September 15, 2010, following
a bench trial, the state court awarded treble damages of $1,500 for each violation, resulting in a
total award of $459 million.

6
Policy with Alea did or did not cover. Specifically, Alea sought a declaratory

judgment that: (1) it did not have to indemnify AHS for damages because the

Policy did not cover the claims in the state lawsuit; (2) even if the Policy covered

those claims, Alea did not have to pay any damages award up to $500 per

individual because that amount fell within the per-claimant deductible schedule in

the Policy; and (3) any award in the state lawsuit increasing the $500 damages

award based on a finding of willful or knowing violations of the TCPA by AHS

was not covered due to the Policy’s exclusion of punitive or exemplary damages.

FastSigns and Alea filed cross-motions for summary judgment.4 In rulings

not challenged in this appeal, the district court determined: (1) that the Policy

obligated Alea to defend and indemnify AHS in the state lawsuit; and (2) that

AHS’s facsimile transmissions in violation of the TCPA amounted to violations of

“a person’s right of privacy” for purposes of Advertising Injury Liability under the

Policy.5 In rulings now challenged in this appeal, the district court concluded that:

4
Alea actually filed its Motion for Summary Judgment after the deadline, and had to seek
the district court’s leave to file its motion. The district court allowed this tardy filing; that
decision is not on appeal.
5
As to Advertising Injury Liability coverage, there are arguably issues whether that
coverage, as defined in the Policy, exists only when the content of the material published by
unsolicited faxes violates a person’s right to privacy or whether the TCPA-prohibited publication
of the unsolicited advertisement is itself violative of a person’s right to privacy. See Penzer v.
Transp. Ins. Co., 545 F.3d 1303, 1312 (11th Cir. 2008) (Penzer I) (certifying to Florida Supreme
Court question whether advertising injury liability insurance covered liability for unsolicited
faxes in violation of the TCPA); Penzer v. Transp. Ins. Co., 29 So. 3d 1000, 1002 (Fla. 2010)

7
(1) the $500 per-claimant deductible applies to AHS’s coverage for Advertising

Injury Liability; (2) treble damages under the TCPA are punitive in nature and

consequently are excluded by the Policy; and (3) the Policy does not cover any

attorneys’ fees awarded against AHS in the state lawsuit.6 The parties do not

dispute that the Policy was entered into in Georgia and that Georgia law governs

construction of the Policy.7 Thus we first examine relevant Georgia law and then

the specific parts of the Policy in issue.

II. GEORGIA LAW

Georgia law directs courts interpreting insurance policies to ascertain the

intention of the parties by examining the contract as a whole. Ryan v. State Farm

Mut. Auto. Ins. Co., 261 Ga. 869, 872 (1992). A court must first consider “the

(Penzer II) (answering certified question in affirmative under Florida law); Penzer v. Transp. Ins.
Co., 605 F.3d 1112, 1113-14 (11th Cir. 2010) (Penzer III) (remanding to district court for
judgment in accord with Florida Supreme Court’s ruling). Although these insurance coverage
issues were litigated in the district court, they are not raised here and we need not address them
under Georgia law.
6
On the last day of discovery, FastSigns filed a Motion to Compel Discovery from Alea,
alleging that Alea improperly withheld documents under a claim of privilege. The district court
denied FastSigns’s Motion to Compel, ruled its motion was not “substantially justified,” and
ordered it to pay costs and attorneys’ fees to Alea. FastSigns appeals the district court’s denial of
its Motion to Compel and the award of attorneys’ fees to Alea. After review, we find no abuse of
discretion or reversible error in the district court’s discovery rulings and award of attorneys’ fees.
Thus, we affirm those particular rulings without further discussion.
7
The construction of an insurance contract is a question of law the Court reviews de novo.
St. Paul Fire & Marine Ins. Co. v. ERA Oxford Realty Co. Greystone, LLC, 572 F.3d 893, 897
(11th Cir. 2009); Technical Coating Applicators, Inc. v. U.S. Fid. & Guar. Co., 157 F.3d 843,
844 (11th Cir. 1998).

8
ordinary and legal meaning of the words employed in the insurance contract.” Id.

An insurance policy “should be read as a layman would read it.” York Ins. Co. v.

Williams Seafood of Albany, Inc., 273 Ga. 710, 712 (2001). “[P]arties to the

contract of insurance are bound by its plain and unambiguous terms.” Peachtree

Cas. Ins. Co. v. Kim, 236 Ga. App. 689, 690 (1999). “If the terms of the contract

are plain and unambiguous, the contract must be enforced as written . . . .” Ryan,

261 Ga. at 872.

An ambiguity exists, however, when the plain words of a contract are fairly

susceptible of more than one meaning. Collier v. State Farm Mut. Auto. Ins. Co.,

249 Ga. App. 865, 867 (2001). Georgia law teaches that an ambiguity “is

duplicity, indistinctness, an uncertainty of meaning or expression.” Id. When a

term in a contract is ambiguous, Georgia courts “apply the rules of contract

construction to resolve the ambiguity.” Certain Underwriters at Lloyd’s of

London v. Rucker Constr., Inc., 285 Ga. App. 844, 848 (2007).

Pursuant to Georgia’s rules of contract construction, “[t]he construction

which will uphold a contract in whole and in every part is to be preferred, and the

whole contract should be looked to in arriving at the construction of any part.”

O.C.G.A. § 13-2-2(4). Further, ambiguities are construed against the drafter of the

contract (i.e., the insurer), and in favor of the insured. Kim, 236 Ga. App. at 690;

9
O.C.G.A. § 13-2-2(5). Accordingly, in this case, any ambiguity will be construed

against Alea, the drafter of the Policy, and in favor of coverage.

If the ambiguity remains after the court applies the rules of construction,

“the issue of what the ambiguous language means and what the parties intended

must be resolved by [the finder of fact].” Rucker Constr., 285 Ga. App. at 848.

(quotation marks omitted).

III. DEDUCTIBLE

The district court ruled a $500 per-claimant deductible applies to any

damages from Advertising Injury Liability awarded against AHS. The district

court’s determination was based on the Policy’s schedule, contained in a two-page

“Optional Provisions Endorsement,” that states:

THIS ENDORSEMENT CHANGES THE POLICY PLEASE READ IT
CAREFULLY
OPTIONAL PROVISIONS ENDORSEMENT

In consideration of the premium charged, it is agreed that the following special
provisions (indicated by an “X”) apply to this policy
SCHEDULE
(x) Bodily Injury and Property Damage Liability Deductible Endorsement
Coverage Amount and Basis of Deductible
Bodily Injury Liability $500.00 per claimant
Property Damage Liability $500.00 per claimant
Personal Injury Liability $500.00 per claimant
Advertising Injury Liability $500.00 per claimant

10
 The district court stressed that this is the only deductible provision

mentioning Advertising Injury Liability and this schedule plainly provides for a

deductible of $500 per claimant for Advertising Injury Liability. The district court

determined that “[t]he plain language of the Policy suffices to determine the

parties’ intent with respect to the deductible for advertising injury liability, which

is the type of liability at issue in this case.”

On appeal, AHS primarily argues that the district court erred because the

“Optional Provisions Endorsement,” in which the Advertising Injury Liability

deductible appears, applies only to coverage for Bodily Injury Liability or

Property Damage Liability, or alternatively that the Policy is at least ambiguous as

to the deductible.8

We conclude that the district court committed no error in its construction of

the Policy, and this “Optional Provisions Endorsement” in particular. The

Endorsement plainly sets forth a $500 “per claimant” deductible for all

“Advertising Injury Liability.” These plain words are not susceptible to more than

one meaning.

8
This Optional Provisions Endorsement also contains a later paragraph (entitled “Bodily
Injury and Property Damage Liability Deductible Endorsement”), that states (1) any limitations
on the application of this endorsement must be written below; and (2) that if no such limitations
appear, “the deductibles apply to damages for all ‘bodily injury’ and ‘property damage,’ however
caused.” However, nothing in this later discussion mentions Advertising Injury Liability or
contradicts the text of the blocked schedule.

11
 We fully recognize that this plain statement in the “Optional Provisions

Endorsement” is placed under the sub-phrase “Bodily Injury and Property Damage

Liability Deductible Endorsement.” However, the schedule itself is blocked in

bold, contains its own bolded column heading of “Coverage” and thereunder

separates out all four types of coverage in the Policy: Bodily Injury Liability;

Property Damage Liability; Personal Injury Liability; and Advertising Injury

Liability. The blocked schedule then states across from each type of liability

coverage that the deductible is $500 per claimant. Nothing in the rest of this

Endorsement makes this plain language in the blocked schedule ambiguous.

Further, the only other deductible schedule in the entire Policy provides expressly

for a deductible of $500 per occurrence for Bodily Injury Liability and/or Property

Damage Liability combined, but makes no mention of Personal Injury Liability or

Advertising Injury Liability.

To accept AHS’s argument would ignore the plain text of the blocked

schedule. Importantly, it would also read the Advertising Injury Liability

deductible language out of the Policy, rendering it nugatory, an outcome

disfavored by the Georgia courts. See Harkins v. Progressive Gulf Ins. Co., 262

Ga. App. 559, 561 (2003) (“In construing an insurance contract, a court must

consider it as a whole, give effect to each provision, and interpret each provision

12
to harmonize with each other.” (emphasis added) (quotation marks omitted)). It is

not this Court’s role to aid the insured by extending its coverage beyond that for

which it contracted. See Burnette v. Ga. Life & Health Ins. Co., 190 Ga. App.

485, 485 (1989) (“Courts have no more right by strained construction to make an

insurance policy more beneficial by extending the coverage contracted for than

they would have to increase the amount of coverage.”).9 Accordingly, we find no

error in the district court’s conclusion that the $500 per-claimant deductible

applies to AHS’s Advertising Injury Liability coverage.10

IV. PUNITIVE DAMAGES EXCLUSION

As noted earlier, the TCPA makes it “unlawful for any person . . . to use any

telephone facsimile machine, computer, or other device to send an unsolicited

9
The insured AHS also contends that Alea should be equitably estopped from asserting
non-coverage defenses in this declaratory judgment action because the attorneys Alea hired to
represent AHS in the state lawsuit allegedly failed to notify AHS of a $1,000,000 settlement offer
by FastSigns. We reject AHS’s equitable estoppel argument. Nothing herein, however, rules on
whether this affects the monetary limits of liability under Alea’s Policy.
10
On appeal, FastSigns contends that several of these issues decided by the district court,
such as applicability of the deductible, were not ripe for adjudication, and that the district court
therefore rendered an advisory opinion. Each of FastSigns’s contentions lacks merit. See, e.g.,
Maryland Casualty Co. v. Pacific Coal & Oil Co., 312 U.S. 270, 271-74, 61 S. Ct. 510, 511-13
(1941) (finding justiciable controversy in declaratory judgment action seeking interpretation of
auto insurance contract). This appeal is not similar to American Fidelity & Casualty Co. v.
Pennsylvania Threshermen and Farmers’ Mutual Casualty Insurance Co., 280 F.2d 453 (5th Cir.
1960), which involved how liability for unresolved claims should be apportioned between several
insurance companies. See Edwards v. Sharkey, 747 F.2d 684, 686-87 (11th Cir. 1984)
(discussing and distinguishing American Fidelity).

13
advertisement to a telephone facsimile machine.” 47 U.S.C. § 227(b)(1)(C). The

TCPA creates a private right of action under which a party can bring “an action to

recover for actual monetary loss from such a violation, or to receive $500 in

damages for each such violation, whichever is greater.” Id. § 227(b)(3)(B). The

TCPA is essentially a strict liability statute which imposes liability for erroneous

unsolicited faxes. Penzer v. Transp. Ins. Co., 545 F.3d 1303, 1311 (11th Cir.

2008).

However, if the court determines that “the defendant willfully or knowingly

violated” the TCPA, “the court may, in its discretion, increase the amount of the

award to an amount equal to not more than 3 times the amount available under

subparagraph (B) of this paragraph.” 47 U.S.C. § 227(b)(3) (emphasis added).

The TCPA does not require any intent for liability except when awarding treble

damages. Penzer, 545 F.3d at 1311. Importantly though, the intent for treble

damages does not require any malicious or wanton conduct, but rather is satisfied

by merely “knowing” conduct.

Although the Policy easily could have excluded treble damages by name, it

does not do so. Rather, the Policy only has an exclusion for “damages attributable

to punitive or exemplary damages,” as follows:

Exclusion–Punitive or Exemplary Damage

14
 The following exclusion is added to Coverages A, B, and C (Section I):
This insurance does not apply to a claim of or indemnification for punitive or
exemplary damages. If a suit shall have been brought against you for a claim
within the coverage provided under the policy, seeking both compensatory and
punitive or exemplary damages, then we will afford a defence for such action.
We shall not have an obligation to pay for any costs, interest, or damages
attributable to punitive or exemplary damages.

(Emphasis added).11 The Policy does not define punitive damages. Here, the

disputed issue is whether the trebling of the statutory compensatory damages in 47

U.S.C. § 227(b)(3) constitutes punitive damages for purposes of the punitive

damages exclusion in the Policy.

The district court determined that treble damages under the TCPA are

punitive in nature, concluding that they are “closer to punishment than to

payback.” Accordingly, the district court held that any treble damages awarded

against AHS in the state lawsuit fell under the punitive damages exclusion in the

Policy, and Alea is not obligated to indemnify AHS for those treble damages.

Before interpreting the TCPA and the punitive damages exclusion in the Policy,

we examine relevant Supreme Court cases about the nature of statutory treble

damages.

11
Exemplary damages is a synonym for punitive damages. See, e.g., O.C.G.A § 51-12-
5.1(a) (stating that, for purposes of Georgia’s punitive damages statute, “punitive damages” is
synonymous with “exemplary damages”). Thus, we refer simply to punitive damages throughout
this opinion.

15
A. Supreme Court Cases Examining Statutory Treble Damages

The Supreme Court has addressed the issue of whether treble damages

should be considered compensatory or punitive in the context of several different

statutes. Generally, Supreme Court “cases have placed different statutory treble-

damages provisions on different points along the spectrum between purely

compensatory and strictly punitive awards.” PacifiCare Health Sys., Inc. v. Book,

538 U.S. 401, 405, 123 S. Ct. 1531, 1535 (2003). The Supreme Court has found

that “the tipping point between payback and punishment defies general

formulation, being dependent on the workings of a particular statute and the

course of particular litigation.” Cook Cnty., Ill. v. United States ex rel. Chandler,

538 U.S. 119, 130, 123 S. Ct. 1239, 1246 (2003).

In fact, treble damages statutes defy easy categorization as compensatory or

punitive in nature. Whether treble damages under a given statute are considered

compensatory or punitive is an intensely fact-based inquiry that may vary statute-

to-statute. Compare Agency Holding Corp. v. Malley-Duff & Assocs., Inc., 483

U.S. 143, 151, 107 S. Ct. 2759, 2764 (1987) (“Both RICO and the Clayton Act are

designed to remedy economic injury by providing for the recovery of treble

damages, costs, and attorney’s fees.”), Shearson/Am. Express, Inc. v. McMahon,

482 U.S. 220, 240, 107 S. Ct. 2332, 2345 (1987) (discussing the “remedial role of

16
the treble-damages provision” in RICO), Am. Soc’y of Mech. Eng’rs, Inc. v.

Hydrolevel Corp., 456 U.S. 556, 575, 102 S. Ct. 1935, 1947 (1982) (noting

antitrust private action, which allows for treble damages, “was created primarily as

a remedy for the victims of antitrust violations,” and stating that “[t]reble damages

make the remedy meaningful by counter-balancing the difficulty of maintaining a

private suit under the antitrust laws” (quotation marks omitted)), Brunswick Corp.

v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 485-86, 97 S. Ct. 690, 696 (1977)

(characterizing § 4 of the Clayton Act, 15 U.S.C. § 15, which permits recovery of

treble damages, as “in essence a remedial provision”), Chandler, 538 U.S. at 130-

34, 123 S. Ct at 1246-49 (stating, in a lawsuit against a municipal corporation, that

“it is important to realize that treble damages have a compensatory side, serving

remedial purposes in addition to punitive objectives,” and concluding a municipal

corporation is a “person” subject to treble damages under the False Claims Act),12

PacifiCare Health Sys., 538 U.S. at 405-07, 123 S. Ct. at 1535-36 (discussing the

Supreme Court’s prior conclusions that RICO’s treble-damages provision is

remedial, construing an arbitration clause prohibiting punitive damages, finding

12
The False Claims Act makes treble damages available against any person who, inter
alia, “knowingly presents, or causes to be presented, a false or fraudulent claim for payment or
approval.” 31 U.S.C. § 3729(a)(1) (emphasis added). Both Chandler and Stevens construed the
same FCA but appear to have reached opposite conclusions based on whether a state entity or a
municipal corporation was the defendant.

17
the application of that clause to statutory treble damages under RICO “is, to say

the least, in doubt,” and leaving it to arbitrator to determine meaning of punitive

damages exclusion in arbitration agreement), with Vt. Agency of Natural Res. v.

United States ex rel. Stevens, 529 U.S. 765, 784-88, 120 S. Ct. 1858, 1869-71

(2000) (stating, in context of a lawsuit against a state, that the state is immune

from punitive damages, that the False Claims Act “imposes damages that are

essentially punitive in nature,” and thus that the state is not a “person” who can be

liable under False Claims Act), Tex. Indus., Inc. v. Radcliff Materials, Inc., 451

U.S. 630, 639, 101 S. Ct. 2061, 2066 (1981) (indicating that treble damages under

the antitrust laws can be considered punitive in nature and stating “[t]he very idea

of treble damages reveals an intent to punish past, and to deter future, unlawful

conduct, not to ameliorate the liability of wrongdoers”).

In short, there is no rigid rule on characterizing treble damages statutes as

either compensatory or punitive. With this background, we turn to the TCPA.

B. Nature of TCPA’s Treble Damages

Here, the structure and language of the TCPA are significant. Section

227(b)(3) provides:

(3) Private right of action

18
 A person or entity may, if otherwise permitted by the laws or rules of court of
a State, bring in an appropriate court of that State- -

(A) an action based on a violation of this subsection or the regulations
prescribed under this subsection to enjoin such violation,

(B) an action to recover for actual monetary loss from such a violation,
or to receive $500 in damages for each such violation, whichever is
greater, or

(C) both such actions.

If the court finds that the defendant willfully or knowingly violated this
subsection or the regulations prescribed under this subsection, the court
may, in its discretion, increase the amount of the award to an amount
equal to not more than 3 times the amount available under subparagraph
(B) of this paragraph.

47 U.S.C. § 227(b)(3) (emphasis added). The statute itself does not say whether

these treble damages are considered compensatory or punitive. While this Court

has not ruled on the nature of treble damages in the TCPA, we have held that the

TCPA’s $500 statutory damages provision is not punitive. Penzer, 545 F.3d at

1311.13

13
In making its determination about the $500 statutory damages, the Penzer Court
reasoned: “The TCPA provides for $500 statutory damages and for treble damages for willful or
knowing conduct, 47 U.S.C. § 227(b)(3), which is an indication that the statutory damages were
not designed to be punitive damages.” Penzer, 545 F.3d at 1311. However, the Penzer Court
followed that analysis by pointing out that “punitive damages under Florida law must be based
on behavior which indicates a wanton disregard for the rights of others.” Id. (quotation marks
omitted). Given, in part, the nature of the conduct triggering punitive damages under Florida
law, the Penzer Court concluded that Florida’s public policy–prohibiting insuring against
punitive damages liability–did not apply to the $500 statutory damages under the TCPA. Id.
In Penzer, the insured had settled a class action claim arising from its 24,000 unsolicited

19
 Further, the TCPA’s statutory language directly links the base compensatory

damages in subparagraph B (either actual monetary loss or $500, whichever is

greater) to the treble damages when it says that “the court may . . . increase the

amount . . . to not more than 3 times the amount available under subparagraph

(B).” 47 U.S.C. § 227(b)(3). In other words, the statute allows the court to

“increase” the compensatory award by up to three times. Id. The statute does not

require a trebling, but permits an increase up to three times. The statute also caps

damages at up to three times the § 227(b)(3)(B) compensatory amount. “[C]lassic

punitive damages . . . leave the jury with open-ended discretion over the amount”

of the damage award; treble damages under the TCPA limit the court to trebling

the amount of the compensatory award. Chandler, 538 U.S. at 132, 123 S. Ct. at

1247.

And given the relatively small amount of statutory damages available under

the TCPA, trebling these damages appears to be a mechanism to encourage

victims of unsolicited “junk” faxes to file suit. Cf. Chandler, 538 U.S. at 131, 123

S. Ct. at 1247 (stating that difference between double and treble damages in qui

faxes for $12 million based on $500 in statutory damages per fax. Id. at 1304 n.1. No treble
damages were part of the settlement and thus the issue in Penzer involved only the TCPA’s $500
in statutory damages.

20
tam cases may serve not to punish, but instead to encourage private plaintiffs to

litigate).

Finally, the TCPA, which allows treble damages for either willful or

knowing conduct, does not match up with Georgia’s conduct requirements for

punitive damages. See O.C.G.A. § 51-12-5.1(b) (stating that Georgia law requires

“clear and convincing evidence that the defendant’s actions showed willful

misconduct, malice, fraud, wantonness, oppression, or that entire want of care

which would raise the presumption of conscious indifference to consequences”

before a jury may award punitive damages).14 To the extent we apply Georgia law

in construing the Policy, Georgia’s conduct requirement for statutory punitive

damages is materially different from the TCPA conduct requirement of knowingly

sending an unsolicited fax. Further, the Georgia courts have rejected the claim

that treble damages are in every case the substantial equivalent of punitive

damages. Williams Gen. Corp. v. Stone, 279 Ga. 428, 429-30 (2005); Colonial

Lincoln-Mercury Sales, Inc. v. Molina, 152 Ga. App. 379, 382 (1979).15

14
The Georgia punitive damages statute also requires clear and convincing evidence to
impose punitive damages; the TCPA includes no such restriction.
15
In Williams, the Georgia Supreme Court stated:
Punitive damages . . . serve the legislative purpose of imposing sanctions, whereas treble
damages, which are authorized by the statute without reservation in every civil RICO action,
further RICO’s goal of compensating victims and providing incentive for “private attorney
generals” [sic] to initiate actions against those in violation of the Act. . . . We thus reject the

21
 For all of these reasons, we conclude that, for the purposes of interpreting

the coverage provided by an insurance contract governed by Georgia law, the

TCPA’s treble damages provision falls more on the compensatory than the

punitive side. Alea could have drafted the Policy’s punitive damages exclusion to

expressly bar coverage for “treble damages,” or all damages that were “in any way

non-compensatory,” or damages that were “in part in the nature of punitive

damages.” But it did not. And arguably even if the Policy’s punitive damages

exclusion could reasonably be interpreted to extend to treble damages under the

TCPA, it also can reasonably be interpreted, for the above-discussed reasons, not

to extend to TCPA treble damages. Therefore, the punitive damages exclusion is

at a minimum ambiguous, and under Georgia law must be construed against Alea

and in favor of coverage. See O.C.G.A. § 13-2-2(5) (“If the construction is

doubtful, that which goes most strongly against the party executing the instrument

or undertaking the obligation is generally to be preferred.”); York Ins. Co., 273

Ga. at 712 (stating that, in construing insurance contracts, “exclusions will be

strictly construed against the insurer and in favor of coverage”). Thus, the district

court erred in concluding the Policy excluded coverage for TCPA treble damages.

Court of Appeals’ premise that clear and convincing evidence is required because treble
damages are the substantial equivalent of punitive damages.
279 Ga. at 429-30.

22
 V. ATTORNEYS’ FEES

In the Insuring Agreement for Coverage B, the Policy obligates Alea to “pay

those sums that the insured [AHS] becomes legally obligated to pay as damages

because of . . . advertising injury to which this insurance applies.” In the

Supplementary Payments section for Coverages A and B, the Policy obligates Alea

to pay “with respect to any claim or suit [Alea] defend[s] . . . [a]ll costs taxed

against the insured in the suit.” (Emphasis added). Alea has not contested the

district court’s determination that it must indemnify AHS for costs awarded in the

state lawsuit. The only issue is whether the district court properly concluded that

Alea is not obligated to indemnify AHS for attorneys’ fees awarded to FastSigns.

On appeal, AHS does not argue that attorneys’ fees fall under the Policy’s

above coverage for “costs taxed against the insured.”16 Rather, AHS relies heavily

on a Georgia statute that allows a plaintiff to recover the “expenses of litigation”

where “the defendant has acted in bad faith, has been stubbornly litigious, or has

caused the plaintiff unnecessary trouble and expense.” O.C.G.A. § 13-6-11. AHS

contends that attorneys’ fees are “expenses of litigation” and thus become

16
The ordinary and legal meaning of “costs” under Georgia law does not include
attorneys’ fees. See Worsham Bros. v. FDIC, 167 Ga. App. 163, 166 (1983).

23
“damages” covered under the Policy under § 13-6-11. AHS contends Alea’s

obligation to cover attorneys’ fees arises from Alea’s contractual duty to

indemnify AHS for any “damages” award.17

Under plain language interpretation, AHS’s argument runs contrary to the

“ordinary and legal meaning” of the Policy’s terms. Ryan, 261 Ga. at 872. Under

Georgia law, attorneys’ fees, even where recoverable, are not typically included

within the ordinary species of damages. See, e.g., Bldg. Mat’ls Wholesale, Inc. v.

Triad Drywall, LLC, 287 Ga. App. 772, 778 (2007) (“Because litigation expenses

(costs and attorney fees) are wholly ancillary, they are not recoverable when no

damages are awarded.” (quotation marks omitted)); 4WD Parts Ctr., Inc. v.

Mackendrick, 260 Ga. App. 340, 345 (2003) (“Attorney fees are not recoverable

under OCGA § 13-6-11 where there is no award of damages or other relief on any

underlying claim.”); Fontaine Condo. Ass’n v. Schnacke, 230 Ga. App. 469, 470

(1998) (stating that “recovery of attorney fees [is] generally foreclosed unless

damages [are] recovered”); George F. Brown & Sons, Inc. v. Knowles, 196 Ga.

App. 594, 595 (1990) (“Since damages are not recoverable, appellee is not entitled

17
We recognize that FastSigns separately argues that the state trial court may award
attorneys’ fees under O.C.G.A. § 9-15-14, Georgia’s frivolous litigation statute, or some other
alternative to § 13-6-11. FastSigns contends that this would undercut the district court’s
determination that Alea has no obligation to indemnify AHS for attorneys’ fees, which FastSigns
argues was based solely on § 13-6-11. FastSigns’s argument lacks merit.

24
to attorney fees.”); see also Credle v. East Bay Holding Co., 263 Ga. 907 (1994)

(stating, in bid contest case, that “attorney fees could be recovered, not as an

inherent part of the damages incurred by a frustrated bidder, but by establishing

the requirements of the particular statute that authorizes attorney fees” (quotation

marks and citation omitted)). Thus, even where attorneys’ fees are recoverable

under O.C.G.A. § 13-6-11, they are ancillary to a plaintiff’s damages claim and

require proof of an additional element. See O.C.G.A. § 13-6-11; 4WD Part Ctr.,

260 Ga. App. at 345. That “attorneys’ fees” would be subsumed within the

Policy’s reference to “damages” is not consistent with a plain, ordinary-meaning

reading of the Policy. Furthermore, that attorneys’ fees are part of the “expenses

of litigation” under § 13-6-11 does not mean they become “damages” under the

Policy. The Policy covers damages and costs but notably does not mention

attorneys’ fees.

This plain-language conclusion is also supported by the Policy’s structure.

See O.C.G.A. § 13-2-2(4) (stating that “the whole contract should be looked to in

arriving at the construction of any part”). The Policy’s Insuring Agreement for

Coverage B includes this “damages” indemnity:

We will pay those sums that the insured becomes legally obligated to
pay as damages because of personal injury or advertising injury to which
this insurance applies. We will have the right and duty to defend any

25
 suit seeking those damages. We may at our discretion investigate any
occurrence or offense and settle any claim or suit that may result. . . .

The Insuring Agreement places in separate sentences Alea’s obligations to (1) pay

damages AHS becomes obligated to pay, (2) defend lawsuits against AHS, and (3)

investigate and settle claims. In the next paragraph, that Insuring Agreement then

states: “No other obligation or liability to pay sums or perform acts or services is

covered unless explicitly provided for under SUPPLEMENTARY PAYMENT –

COVERAGES A AND B.”

In turn, the separate Supplementary Payment section of the Policy, referred

to above, describes Alea’s payment obligations “with respect to any claim or suit

we defend.” These “Supplemental Payment” obligations are expressly listed as:

(1) expenses incurred by Alea in defending AHS’s lawsuits; (2) cost of certain

bonds; (3) reasonable expenses AHS incurs at Alea’s request in investigating or

defending the lawsuit; (4) all costs taxed against AHS in the lawsuit; (5) pre-

judgment interest; and (6) post-judgment interest. Notably absent is any

supplementary payment for attorneys’ fees for claimants against AHS.

There is no language in this Policy provision, or any other provision of the

Policy cited by AHS, that leads to the conclusion that the insurance contract

contemplated that Alea would indemnify AHS for its opponents’ attorneys’ fees.

26
For all of these reasons, we conclude the district court did not err in concluding

that Alea is not obligated to indemnify AHS for attorneys’ fees assessed in the

state lawsuit.

VI. CONCLUSION

For the foregoing reasons, we affirm the district court’s rulings as to the

$500 per-claimant deductible and the attorneys’ fees. We reverse the district

court’s ruling that the Policy’s punitive damages exclusion applies to treble

damages under the TCPA. We remand for further proceedings consistent with

this opinion.18

AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.

18
We deny FastSigns’s and Alea’s motions to supplement the record on appeal.

27