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A federal district court in Florida has preliminarily approvedsettlement of a class action lawsuit asserting that about 2.5million cell phones were sent text messages in violation of law.Once the court gives final approval to the settlement, the focuswill turn to whether the plaintiffs' claims are covered byinsurance — the only potential source of recovery for theplaintiffs and their attorneys.

The case

After Jacob Horn and Robert Vetter sued iCan Benefit Group, LLC,the defendant passed the class action over to its insurer, LibertyInternational Underwriters, Inc., seeking coverage under itsinsurance policy, which had a $2 million liability limit.

Liberty denied the claim.

The plaintiffs and iCan then agreed to settle the action. iCan,however, didn't have the financial means to satisfy a judgment orto fund a reasonable class-wide settlement.

The parties decided to focus on a potential alternative fundingsource. They identified an estimated 2,517,213 unique telephonenumbers to which iCan or a third party on its behalf had sent textmessages in violation of law. Then, as part of the proposedsettlement, iCan assigned its rights under the Liberty policy tothe plaintiffs and the class members pursuant to an assignment ofrights.

The plaintiffs asked the federal district court to preliminarilyapprove the class settlement.

Related: Surprise! Your company may have insurance coveragefor a consumer class action

The court's decision

The court granted the motion, preliminarily approving thesettlement agreement subject to a final hearing.

In its preliminary approval order, the court found that thesettlement agreement was “fair, reasonable, and adequate,” that ithad been entered into “in good faith,” and that it was “free ofcollusion” to the detriment of the settlement class. The courtordered notice of the litigation and the proposed settlement sentto the settlement class and scheduled a full hearing on theproposed settlement.

The court also preliminarily certified a class of “[a]ll personsin the United States who from a date of four years prior to thefiling of the initial Complaint to the present: (1) iCan (or athird person acting on behalf of iCan) sent text messages; (2) tothe person's cellular telephone or number assigned to a VOiP linewhich was, as to the VOiP line, ultimately delivered to either theperson's cellular telephone or some other medium which captures andrecords a text message and for which the person is charged a fee;(3) for the purpose of selling iCan's products and/or services.”The court ordered the typical exclusions from the class, includingiCan's affiliates and counsel.

Related: Yahoo loses bid for insurance coverage: Unsolicitedtext messages

What's next?

After the court finally approves the settlement, the plaintiffsand the class will bring a coverage action against Liberty. If theyare successful, they will ask the court to approve a distributionto the class members.

What if the plaintiffs and the class are not successful in theircoverage action against Liberty?

The court's preliminary approval order answered that questionquite clearly:

If [the p]laintiffs and the [c]lass are not successful in theircoverage action against Liberty, this matter shall be closedwithout any monetary distributions to [c]lass [m]embers, withoutany awards to the [c]lass [r]epresentatives, and without any awardof attorneys' fees and costs.

The case is Horn v. iCan Benefit Group, LLC.

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Steven A. Meyerowitz, Esq., is the director of FC&S Legal,the editor-in-chief of the Insurance Coverage Law Report, and thefounder and president of Meyerowitz Communications Inc. Email himat [email protected].