| Navigators Ins. Co. v Sterling Infosystems, Inc. |
| 2016 NY Slip Op 08941 |
| Decided on December 29, 2016 |
| Appellate Division, First Department |
| Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. |
| This opinion is uncorrected and subject to revision before publication in the Official Reports. |
Decided on December 29, 2016
Acosta, J.P., Renwick, Andrias, Saxe, Gische, JJ.
2555 653024/13
v
Sterling Infosystems, Inc., et al., Defendants-Respondents.
Goldberg Segalla LLP, Garden City (Brendan T. Fitzpatrick of counsel), for appellant.
Lowenstein Sandler LLP, New York (Lynda A. Bennett of counsel), for respondents.
Order and judgment (one paper), Supreme Court, New York County (Ellen M. Coin, J.), entered July 28, 2015, to the extent appealed from as limited by the briefs, declaring that plaintiff is obligated to indemnify defendants for the settlement reached in an action in the U.S. District Court for the Southern District of New York titled Ernst v Dish Network, LLC , unanimously affirmed, with costs.
Pursuant to an errors and omissions insurance policy, plaintiff is obligated to pay all damages arising in connection with defendants' performance of their professional services. The policy defines damages as "any compensatory sum," including a settlement, and excludes coverage for, inter alia, penalties. With the requisite consent of plaintiff, defendants entered into a settlement with the plaintiffs in the putative class action Ernst v Dish Network, LLC , which alleged that defendants' business practices violated provisions of the Fair Credit Reporting Act (FCRA), causing the class members injury, including, in certain instances, termination from employment.
Plaintiff argues that the statutory damages that defendants paid to settle the Ernst action constitute a penalty, rather than compensatory damages, and are therefore excluded from their insurance coverage. The motion court correctly rejected this argument.
To make out a claim under the FCRA (15 USC § 1681 et seq. ), the complaint must allege, inter alia, injury in fact, a "concrete and particularized" and "actual or imminent" "invasion of a legally protected interest," i.e., the statutory right to the fair handling of the plaintiff consumer's credit information (see Spokeo, Inc. v Robins , ___ US ___, 136 S. Ct. 1540, 1547-1548 [2016] [internal quotation marks omitted]). The remedy for "willful" failure to comply with a requirement of the statute is "any actual damages sustained by the consumer by the failure or damages of not less than $100 and not more than $1,000," and "such amount of punitive damages as the court may allow," as well as costs and reasonable attorneys' fees (15 USC § 1681n[a][1A], [2], [3]). Since the consumer must elect the option of either actual or statutory damages, and may also recover punitive damages, it is reasonable to infer, as the motion court did, that the actual and the statutory damages serve the same purpose (see Bateman v American Multi-Cinema, Inc. , 623 F3d 708, 718 [9th Cir 2010]). Moreover, the statute provides separately for a civil penalty (recoverable by the Federal Trade Commission) (see 15 USC § [*2]1681s[a][2]). Plaintiff argues that the limitation of damages to a "willful" violation of the statute evinces a legislative intent to penalize intentional misconduct, rather than compensate for actual damages sustained, but this is not so, since willfulness as a statutory condition of civil liability "cover[s] not only knowing violations of a standard, but reckless ones as well" (Safeco Ins. Co. of Am. v GEICO Gen. Ins. Co. , 551 U.S. 47, 57 [2007]). Thus, it is clear that Congress intended the statutory damages provided for by the FCRA to be compensatory and not a penalty.
We have considered plaintiff's remaining contentions and find them unavailing.
THIS CONSTITUTES THE DECISION AND ORDER
OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.
ENTERED: DECEMBER 29, 2016
CLERK