                   United States Court of Appeals
                        FOR THE EIGHTH CIRCUIT
                                   ___________

                                   No. 04-1497
                                   ___________

Universal Underwriters Insurance      *
Company, a Kansas corporation,        *
                                      *
             Plaintiff - Appellant,   *
                                      *
      v.                              *
                                      *
Lou Fusz Automotive Network, Inc., a * Appeal from the United States
Missouri corporation; Onsite Computer * District Court for the Eastern
Consulting Services, Inc., a Missouri * District of Missouri.
corporation,                          *
                                      *
             Defendants - Appellees,  *
                                      *
West Brothers Chrysler, Inc.;         *
Stephenson Electric Company,          *
                                      *
             Defendants.              *

                                   ___________

                         Submitted: January 13, 2005
                             Filed: March 21, 2005
                               ___________

Before MELLOY, SMITH, and COLLOTON, Circuit Judges.
                           ___________
MELLOY, Circuit Judge.

       Onsite Computer Consulting Services (“Onsite”) brought a class action lawsuit
against Lou Fusz Automotive Network, Inc. (“Lou Fusz”) in state court under the
Telephone Consumer Protection Act, 47 U.S.C. § 227 (the “Act”), a federal statute
that prohibits unsolicited fax advertisements. Lou Fusz tendered the claim to its
insurer, Universal Underwriters Insurance Company (“Universal”). Universal agreed
to provide a defense under a complete reservation of rights and subsequently
instituted this action to seek declaratory judgment regarding its duty to defend and
indemnify Lou Fusz. The district court1 determined that Universal owed Lou Fusz
a defense. The district court also determined that it could not resolve the issue of
indemnification until after resolution of the state court action. We affirm.

                                   I. Background

       Onsite brought its state court, class-action petition on behalf of all persons
harmed by Lou Fusz’s alleged transmission of unsolicited fax advertisements. Onsite
sought class certification, injunctive relief, and "[a]n award of the full amount of
statutory damages allowed under 47 U.S.C. § 227(b)(3), including treble damages,
sustained by Onsite and the Class . . . .” The Act provides for damages in the amount
of actual monetary loss or $500 per violation, whichever is greater. 47 U.S.C. §
227(b)(3)(B). The Act also permits up to treble damages for knowing and willful
violations. Id. at § 227(b)(3). In its answer to the state court complaint, Lou Fusz
denied that it sent unsolicited advertisements or authorized anyone to send unsolicited
advertisements on its behalf. Lou Fusz also alleged that it had permission to send all
challenged faxes.



      1
       The Honorable Catherine D. Perry, United States District Judge for the Eastern
District of Missouri.

                                         -2-
       In response to the present declaratory judgment action, Onsite and Lou Fusz
joined forces to argue in favor of coverage under the policy. Universal presented
numerous arguments against coverage that depended upon the policy’s definitions of
the terms “INJURY” and “DAMAGES.”2 Universal argued that Onsite sought only


      2
          The relevant policy language is as follows:

      INSURING AGREEMENT – WE will pay all sums the INSURED
      legally must pay as DAMAGES (including punitive DAMAGES where
      insurable by law) because of INJURY to which the insurance applies
      caused by an OCCURRENCE arising out of GARAGE OPERATIONS
      or AUTO HAZARD.
             ***
      We have the right and duty to defend any SUIT asking for these
      DAMAGES. WE may investigate and settle any claim or SUIT WE
      consider appropriate. OUR payment of the limit shown in the
      declarations ends OUR duty to defend.
             ***
      “DAMAGES” means amounts awardable by a court of law. . . .
      DAMAGES does not mean civil penalties, fines or assessments.
             ***
      “INJURY” means, with respect to:

      Group 1 – bodily injury, sickness, disease or disability (including death
      resulting from any of these) or damage to or loss of use of tangible
      property;
             ***
      Group 3 – false arrest, false imprisonment, wrongful eviction, wrongful
      detention, malicious prosecution, abuse of process, libel, slander,
      defamation of character, private nuisance (except pollution), invasion of
      rights of privacy or possession of personal property;

      Group 4 – plagiarism, misappropriation of advertising ideas or style,
      infringement of copyright, title, slogan or trademark;
             ***
      With respect to INJURY Groups 3,4, 5 and 6, OCCURRENCE means

                                          -3-
fixed damages of $500 per violation as permitted under the Act and that the fixed
damages were “civil penalties, fines or assessments” excluded from the policy’s
definition of DAMAGES. Universal also argued that the alleged violations of the Act
did not qualify for coverage under any of the policy’s definitions of INJURY.
Finally, Universal argued that violations of the Act were intentional and therefore
excluded from coverage.

       Lou Fusz moved for summary judgment, which the district court granted. The
district court concluded that Onsite sought all available damages, not merely fixed
damages. The district court also concluded that even if Onsite had sought only fixed
damages, such damages were not “civil penalties” that would be excluded from
coverage under the policy, but rather, were at least in part a liquidated sum
representing uncertain and hard-to-quantify actual damages. The district court
determined that an alleged violation of the Act qualified as a private nuisance, and
therefore a Group 3 INJURY under the policy, but the district court did not address
whether a violation of the Act satisfied any of the other definitions of INJURY. The
district court found that the issue of intent was unresolved and therefore Universal
could not be relieved of its duty to defend based on the allegedly intentional nature
of Lou Fusz’s actions. Finally, the district court found Universal’s claim regarding
a duty to indemnify Lou Fusz premature and dismissed that claim without prejudice.

                                   II. Discussion

      Under Missouri law, the interpretation of an insurance policy is a question of
law. Standard Artificial Limb, Inc. v. Allianz Ins. Co., 895 S.W.2d 205, 209 (Mo. Ct.
App. 1995). Accordingly, our review is de novo. In addition, this case comes to us



      acts of the INSURED during the Coverage Part period which result in
      such INJURY.


                                        -4-
following a grant of summary judgment, which we review de novo. Royal Ins. Co.
of America v. Kirksville Coll. of Osteopathic Med., Inc., 304 F.3d 804, 806 (8th Cir.
2002).

       “The duty to defend is broader than the duty to indemnify.” McCormack Baron
Mgmt. Servs. Inc. v. American Guarantee & Liab. Ins. Co., 989 S.W.2d 168, 170
(Mo. 1999) (en banc). The duty to defend exists where there is a potential liability.
Id.; Royal Ins. Co. of America, 304 F.3d at 807 (“[Under Missouri law] the insurer’s
duty to defend arises when there is merely the potential for coverage.”). In assessing
whether there is a duty to defend, we must compare “the language of the policy with
the allegations in the petition.” Auto Club Family Ins. Co. v. Jacobsen, 19 S.W.3d
178, 182 (Mo. Ct. App. 2000). In construing the policy, we must give each term its
ordinary, lay meaning unless the policy expressly defines a term in a technical
manner. Farmland Inds., Inc. v. Republic Ins. Co., 941 S.W.2d 505, 508 (Mo. 1997)
(en banc). Finally, we must resolve any ambiguities in favor of coverage. Aetna Cas.
& Sur. Co. v. Haas, 422 S.W.2d 316, 321 (Mo. 1968) (“[T]he language must be
construed so as to give the insured the protection which he reasonably had a right to
expect; and to that end any doubts, ambiguities and uncertainties arising out of the
language used in the policy must be resolved in his favor.”) (internal quotation
omitted).

       For there to be a potentially covered liability, the complaint must allege
DAMAGES as defined in the policy. The policy’s definition of DAMAGES excludes
“civil penalties, fines or assessments” but includes punitive damages (where punitive
damages are insurable as a matter of law). Universal argues that Onsite requested
only the fixed damages available under the Act and that these fixed damages are
“civil penalties” under the policy.

      Onsite sought “[a]n award of the full amount of statutory damages allowed
under 47 U.S.C. § 227(b)(3), including treble damages . . . .” We believe that Onsite’s

                                         -5-
reference to the “full amount of statutory damages” is a broad request for all forms
of available relief or for the most favorable among the alternative forms of available
relief. Although, in general, the phrase “statutory damages” may be understood as a
limited reference only to fixed damages available under a statute, such a construction
fails in the present case. If we adopt a limited interpretation of the wording “statutory
damages” as set forth in the complaint, the complaint’s following phrase “including
treble damages” makes no sense. If the full amount of statutory damages includes
treble damages, then the term “statutory damages” as used in the complaint cannot be
limited only to the fixed $500 amount. Because Onsite sought the “full amount of
statutory damages” we believe it is clear that Onsite requested exactly what the Act
provides: the greater of actual monetary loss or a fixed sum of $500 per violation,
plus treble damages if appropriate.

       Universal also argues that Onsite failed to allege any harm, and therefore only
stated a claim for fixed damages. The facts as alleged, however, plainly identify harm
to Onsite. Onsite alleged that it received an unsolicited fax. Although the monetary
impact of a single unsolicited fax is minor, it is nevertheless a cost borne by the
recipient and recognized by Congress as a compensable harm. See, e.g., Missouri ex
rel. Nixon v. American Blast Fax, Inc., 323 F.3d 649, 654-55 (8th Cir. 2003) (listing
the various harms caused by the receipt of unsolicited faxes).

       Even if Onsite had sought only fixed damages under the Act, we would still
construe the complaint as having alleged DAMAGES under the policy. Universal
elected not to define the term “civil penalties” when it drafted the policy. Because
the policy does not contain a technical definition for the phrase “civil penalty,” we
must use the term’s lay meaning. If we find that the lay meaning is ambiguous, or
that there is more than one reasonable lay meaning for the term, we must adopt the
meaning that supports a finding of coverage. Aetna Cas. & Sur. Co., 422 S.W.2d at
321. According to Universal, the lay meaning of the term “civil penalty” is any award
that exceeds dollar for dollar compensation for actual loss and has a punitive or

                                          -6-
deterrent effect. Lou Fusz and Onsite, on the other hand, argue that a lay person
would understand a “civil penalty” to be an amount awarded to a public or
governmental body. We disagree with the former interpretation and need not adopt
the latter.

       Initially, we note that Universal’s proffered interpretation is unworkable when
read “in the context of the policy as a whole.” Columbia Mut. Ins. Co. v. Schauf, 967
S.W.2d 74, 77 (Mo. 1998) (en banc). The policy’s definition of DAMAGES includes
amounts awarded as punitive damages. Accordingly, we cannot accept a definition
for “civil penalty” that excludes from the definition of DAMAGES all awards with
a punitive or deterrent effect. Such an interpretation would create an internal
inconsistency in the policy in which one section would authorize the coverage of
punitive awards and another would specifically exclude such awards from coverage.

       Further, even if Universal’s proffered definition did not create an internal
inconsistency, a duty to defend would exist because a portion of the fixed amount
represents a liquidated sum for uncertain and hard-to-quantify actual damages. We
noted in Nixon, 323 F.3d at 654-55, that Congress identified the loss of use of
equipment and phone lines for outgoing and incoming faxes, the expense of paper and
ink, and the resultant inconvenience and annoyance as examples of the harm to
individuals who receive unsolicited fax advertisements. Further we noted that,
“unsolicited fax advertisements can shift to the recipient more than one hundred
dollars per year in direct costs, . . . and . . . unsolicited fax advertising interferes with
company switchboard operations and burdens the computer networks of those
recipients who route incoming faxes into their electronic mail systems.” Id. at 655.
These harms, while small in reference to individual violations of Act, nevertheless
represent compensable harms encompassed by a liquidated sum within the fixed
amount.




                                            -7-
       We also believe that Congress intended the fixed damages available under the
Act to be, at least in part, an incentive for private parties to enforce the Act.
See Forman v. Data Transfer, Inc., 164 F.R.D. 400, 404 (E.D. Pa. 1995) (“The
statutory remedy is designed to provide adequate incentive for an individual plaintiff
to bring suit on his own behalf.”). Because the actual losses associated with
individual violations of the Act are small, this added incentive is necessary. Whether
we view the fixed award as a liquidated sum for actual harm or an incentive for
aggrieved parties to act as private attorneys general, or both, it is clear that the fixed
amount serves more than purely punitive or deterrent goals. Also, the fact that
Congress elected to make treble damages available separate from fixed damages
strongly suggests that the fixed damages serve additional goals other than deterrence
and punishment.

       We also find that the complaint alleges an “INJURY” under the policy. The
policy lists “private nuisance (except pollution), [and] invasion of rights of privacy
or possession of personal property” under the definition of INJURY. It does not limit
or qualify these terms in any manner. It sets forth technical definitions for neither
“private nuisance” nor “invasion of rights of privacy.” Accordingly, under Missouri
law, we must apply ordinary, lay definitions to these terms. Looking at how Congress
described unsolicited fax advertisements, see Nixon, 323 F.3d at 654-55, it is clear
that Congress viewed violations of the Act as “private nuisances” and as “invasions
of privacy” under ordinary, lay meanings of these phrases. Congress also stated:

      Unrestricted telemarketing, however, can be an intrusive invasion of
      privacy and, when an emergency or medical assistance telephone line is
      seized, a risk to public safety.

      Many customers are outraged over the proliferation of intrusive,
      nuisance calls to their homes from telemarketers.

             ***


                                           -8-
       Individuals’ privacy rights, public safety interests, and commercial
       freedoms of speech and trade must be balanced in away that protects the
       privacy of individuals and permits legitimate telemarketing practices.

       Evidence compiled by the Congress indicates that residential telephone
       subscribers consider automated or prerecorded telephone calls,
       regardless of the content or the initiator of the message, to be a nuisance
       and an invasion of privacy.

              ***

       Banning such automated or prerecorded telephone calls to the home . . .
       is the only effective means of protecting telephone consumers from this
       nuisance and privacy invasion.

              ***

       Businesses also have complained to the Congress and the Federal
       Communications Commission that automated or prerecorded telephone
       calls are a nuisance, are an invasion of privacy, and interfere with
       interstate commerce.

 47 U.S.C. § 227 (Historical and Statutory Notes, re: Section 2 of Pub. L. 102-243)
(emphasis added) (internal quotation marks and numbering omitted). Although the
above references cite pre-recorded or unsolicited telephone calls, we previously
equated such calls to intrusive faxes, as did Congress when it defined prohibited
conduct under the Act. See Nixon, 323 F.3d at 657 n.5 (“Artificial or prerecorded
messages, like a faxed advertisement, were believed to have heightened intrusiveness
because they are unable to ‘interact with the customer except in preprogrammed
ways.’”) (quoting S. Rep. No. 102-178, at 4-5) (emphasis added). Universal offers
only technical and restricted legal definitions to support its position that violations of
the Act are neither “private nuisances” nor “invasions of privacy”. Under Missouri
law, we cannot restrict the undefined terms in such a manner.



                                           -9-
       We note also that the issue of Lou Fusz’s intent is an open factual question and
that intent is not a prerequisite to liability under the Act.3 Intent is, however, relevant
to coverage. The policy contains an exclusion which provides, “This insurance does
not apply to . . . any act committed by or at the direction of the INSURED with intent
to cause harm.” Therefore, if a finder of fact ultimately determines that Lou Fusz not
only violated the Act, but did so with an intent to cause harm, the policy would
provide no coverage. Because coverage depends upon resolution of this factual
question, the district court properly refused to rely on the policy’s intentional acts
exclusion.

        Finally, we note that our case is distinct from a recent Seventh Circuit case
which held an insurer did not owe its insured a defense against claims under the Act.
See American States Ins. Co. v. Capital Assocs. of Jackson County, Inc., 392 F.3d 939
(7th Cir. 2004). There, the intentional nature of the violations appeared undisputed,
and the policy specifically excluded from coverage any losses that were “expected or
intended from the standpoint of the insured.” The Seventh Circuit analyzed the issue
of coverage under a definition for “invasion of privacy” where that term appeared only
as a subpart of the broader term “advertising injury.” The court noted that the term
“invasion of privacy” had many meanings, including privacy in the sense of a right to
seclusion (that could be violated by intrusions into private space) or a right to secrecy
(that could be violated by public dissemination of private information). The court
concluded that because the policy at issue only addressed “invasion of privacy” as a
form of “advertising injury,” “invasion of privacy” under that specific policy was


       3
         The Act defines “unsolicited advertisement” as “any material advertising the
commercial availability or quality of any property, goods, or services which is
transmitted to any person without that person’s prior express invitation or
permission.” 47 U.S.C. § 227(a)(4). The Act makes no exception for senders who
mistakenly believe that recipients’ permission or invitation existed. The issue of
intent, or more accurately, the issues of knowledge and willfulness, however, clearly
are material to the question of treble damages.

                                           -10-
limited to secrecy-type privacy rights. The court further determined that intrusive and
unsolicited fax advertisements only touched upon the seclusion-type privacy rights.
Accordingly, invasions of seclusion through unauthorized faxes failed to meet the
policy’s limited definition of “advertising injury.”

        In the present case, by contrast, the policy defines advertising injury in a
section that is entirely separate from the definition of INJURY that includes “invasion
of privacy.” There is no support in the present policy for a limited reading of the term
“invasion of privacy.” In short, differences both as to the insurance policies under
examination and the facts of the alleged offenses make the Seventh Circuit’s case
inapplicable to the current situation.

       We affirm the judgment of the district court.
                       ______________________________




                                         -11-
