United States: TCPA Insurance Claim Issues Continue To Evolve

Originally published by Law360, March 2018

As plaintiffs seek to enforce the Telephone Consumer Protection Act of 1991 with greater regularity, high dollar-value judgments and settlements have become commonplace. This uptick in TCPA cases has in turn led to a wealth of new TCPA-related insurance coverage decisions, most recently in Illinois Union Insurance Company v. U.S. Bus Charter & Limo Inc. There, a New York federal court adopted a broad reading of one key policy term, "professional services," that could strengthen policyholders' arguments for TCPA coverage under errors and omissions policies.

TCPA claims spur coverage disputes in part because the same TCPA violation potentially can trigger multiple different types of insurance coverage: (1) property damage coverage under a commercial general liability policy's "Coverage A"; (2) intangible invasion of privacy coverage under a CGL policy's "Coverage B" for personal or advertising injury; (3) errors and omissions coverage for conduct undertaken in the course of a policyholder's provision of "professional services"; and (4) directors and officers coverage for allegations directed toward conduct by a company's directors or officers.

This article explores multiple evolving arguments for coverage for TCPA claims through the prism of three recent decisions.

The TCPA

In 1991, Congress passed the TCPA in an effort to protect consumers from unwanted automated telephone calls and faxes. The law now covers cell phone text messages as well. It attempts to set boundaries differentiating lawful communications (for example, those where the recipient has given consent in advance) from unlawful communications (for example, those including advertising content without consent).

Damages under the TCPA can be severe — $500 for every single unlawful call, fax or text, or actual damages, whichever is higher. On top of that, courts can award treble damages for willful violations. In the past 5-10 years, hundreds of new TCPA cases have yielded a steady stream of high dollar-value judgments and settlements. In light of the $500 per call damages provision and the breadth of many TCPA automated calls, defendants often settle on favorable terms for class action plaintiffs rather than run the risk of an astronomically high judgment.

Evolving Coverage Issues

The nature of TCPA claims leaves policyholders with multiple possible avenues to coverage, but also incentivizes each potentially responsible insurance company to argue that its policyholder should look elsewhere for coverage. This area of law is rapidly evolving, making experienced insurance coverage counsel especially helpful for policyholders. There are at least three key questions that have arisen in recent cases involving insurance coverage for TCPA claims, which are discussed below.

Does a TCPA Claim Inherently Arise from an Invasion of Privacy?

In Los Angeles Lakers Inc. v. Federal Insurance Company, an Aug. 23, 2017, decision involving potential D&O coverage for automated texts sent by the Los Angeles Lakers, the U.S. Court of Appeals for the Ninth Circuit construed the policy's invasion of privacy exclusion. The exclusion barred coverage for claims "based upon, arising from, or in consequence of ... invasion of privacy." The court analyzed the legislative purpose of the TCPA to determine whether Congress passed the statute to combat invasions of privacy, or was also intended to address other wrongs that might take it outside the scope of the exclusion.

The Ninth Circuit, though acknowledging that Congress may have enacted the TCPA to address other issues in addition to invasion of privacy, nonetheless held that any TCPA case alleged "an implicit invasion of privacy" and barred coverage based on the invasion of privacy exclusion, a version of which is found in many D&O policies.

Los Angeles Lakers, which happened to follow a factually identical TCPA claim against the Los Angeles Clippers, was touted as a victory for insurance companies. However, the reality is less clear. First, a strenuous dissent argued that looking beyond the plain text of the statute was inappropriate in the absence of textual ambiguity, and that TCPA claims were not automatically invasion of privacy claims. The dissent emphasized that the plaintiff chose not to bring common law invasion of privacy claims, which would have made the insurance company's argument stronger.

Second, and critical to the interpretation of the Lakers case, the judge who cast the deciding vote for the insurance company also wrote the following brief but pointed concurrence arguably limiting the scope of the ruling:

I concur with the court's order affirming the decision below. I write separately because the court can — and should — decide the question of whether Emanuel's [the underlying plaintiff's] claim arose from an invasion of privacy on narrower grounds. Emanuel alleged several times in his complaint that the message he received was an invasion of his privacy. Those allegations are sufficient to determine that Emanuel's claim arose from an invasion of privacy. The court need not hold more broadly that a TCPA claim is inherently an invasion of privacy claim.

According to the concurrence, the simple presence of a TCPA cause of action does not mean an invasion of privacy exclusion automatically applies. Together, the concurrence and dissent could give D&O policyholders in the Ninth Circuit a plausible avenue to distinguish the Lakers decision.

Do TCPA Damages Arise from "Professional Services" Qualifying for Coverage under E&O Policies?

In its March 8, 2018, decision in Illinois Union Insurance Company v. U.S. Bus Charter & Limo Inc., a New York federal court considered whether unsolicited text messages from a bus chartering company fell within the policyholder's E&O coverage. The policy described the policyholder's "Professional Services" covered by the policy as including provision of "bus charter broker" services. The term "bus charter broker" was not defined in the policy, but the court looked to other statutes and the dictionary to characterize a broker as "one who acts as a middleman in bargains." In the text messages in question, the policyholder made various offers to recipients to book bus and limousine travel.

The court determined that the services offered were of precisely the sort that a "bus charter broker" would offer. The insurance company countered that "Professional Services" are those that a policyholder provides for its clients' benefit, not directly to consumers for its own benefit. The court was not persuaded, citing the overlap between advertising for oneself and for others in the "modern business world." The court granted coverage for the policyholder's $50 million settlement of the TCPA claims, explaining that excluding coverage would require it to "arbitrarily separate" one part of the policyholder's business from another.

The U.S. Bus Charter case is just the latest in a string of several cases where policyholders have successfully obtained E&O coverage for TCPA claims.

Are Damages Awarded under the TCPA Remedial or Punitive?

In its Feb. 21, 2018, decision in Ace American Insurance Company v. Dish Network LLC, the U.S. Court of Appeals for the Tenth Circuit addressed the "personal or advertising injury" coverage grant in a CGL policy. The insurance company alleged that the policyholder, who had been accused by the underlying plaintiff of "willful and knowing" TCPA violations, sought coverage for penalties that are uninsurable as a matter of public policy. The parties disputed whether statutory damages under the TCPA were "punitive" (intended to punish the defendant) or "remedial" (intended to remedy the underlying plaintiffs' losses). The former would be excluded; the latter would be covered.

Interestingly, the court reached its decision by assessing whether TCPA damages are theoretically assignable to another entity, because under Colorado law, punitive damages cannot be assigned from the offending defendant to another party. The Tenth Circuit acknowledged that courts in other jurisdiction have deemed the TCPA a remedial statute, and recognized the policyholder's argument that statutes can be penal in some contexts and remedial in others. Nonetheless, the court deemed the statutory damages awarded against the policyholder in this case penal in nature, and therefore uninsurable.

While the insurance company won this round, the Tenth Circuit left open the option for future courts to reach the opposite conclusion. Rather than a blanket holding that all TCPA damages are penal, the court cited the underlying plaintiff's prayer for relief, which focused on the policyholder's "willful and knowing" conduct. Had the prayer been phrased differently, the court acknowledged that its decision might have been different.

Other Considerations

In addition to the cases discussed above, policyholders facing TCPA claims should be on the lookout for a host of other factors that can cut in favor of coverage, as well as several that insurance companies may use to attempt to exclude coverage.

First and foremost, every policy is different. The Lakers court emphasized the broad reading California courts give to exclusionary language for claims "arising from" alleged invasions of privacy. Had the policy instead said "for" or "caused by," the court easily could have sided with the policyholder. The definition of "wrongful act," the scope of exclusions for "advertising" and "broadcasting" companies, and the scope of exclusions for loss arising from intentional acts are just a few of the many instances where courts may base their decision on particular policy language — rather than on precedents specific to coverage for TCPA claims.

Second, insurance companies now regularly attempt to insert TCPA-specific exclusions. While policyholders can and should negotiate to avoid such exclusions at the outset, such exclusions do not necessarily bar coverage for underlying lawsuits alleging TCPA violations. Depending on the scope of the TCPA-specific exclusion, common law claims arising out of the same facts can fall outside the exclusion, triggering the insurance company's duty to defend, a duty that generally applies to the policyholder's entire defense — including the TCPA claim. Defending against TCPA/invasion of privacy cases can be very costly, making defense coverage alone a significant victory. And in some instances, defendants may secure dismissal of a TCPA claim based on the plaintiff's failure to meet the statutory elements but still settle on the remaining common law claims, avoiding the TCPA-specific exclusion entirely.

Third, insurance companies construing invasion of privacy exclusions in D&O or E&O policies may emphasize whether a jurisdiction protects a consumer's "right of seclusion" in addition to her "right of secrecy." It is well established that the invasion of privacy tort protects individuals against public disclosure of private information. However, the extent of protection given to an individual's right to be left alone — in this case from unwanted calls, faxes or text messages — is still evolving. Because TCPA violations are specific to this second type of privacy, policyholders must know if and how robustly a jurisdiction protects the "right of seclusion."

Conclusion

Because TCPA claims inherently exist at the nexus between multiple lines of coverage, the landscape of TCPA insurance coverage law is complex. It is also rapidly evolving. Language in an underlying complaint that may implicate an exclusion in one policy may be just what a policyholder needs to secure coverage under another type of policy. It behooves policyholders to think strategically about how their different lines of coverage interact and consult experienced insurance coverage counsel when confronted with a potentially costly TCPA claim.


Cort T. Malone is a shareholder in the New York and Stamford offices of Anderson Kill PC and a member of the firm's insurance recovery and corporate and commercial litigation groups.

Nicholas R. Maxwell is an attorney in the Philadelphia and New York offices of Anderson Kill and a member of the firm's insurance recovery group.


Anderson Kill practices law in the areas of Insurance Recovery, Commercial Litigation, Environmental Law, Estates, Trusts and Tax Services, Corporate and Securities, Antitrust, Banking and Lending, Bankruptcy and Restructuring, Real Estate and Construction, Foreign Investment Recovery, Public Law, Government Affairs, Employment and Labor Law, Captive Insurance, Intellectual Property, Corporate Tax, Hospitality, and Health Reform. Recognized nationwide by Chambers USA and best-known for its work in insurance recovery, the firm represents policyholders only in insurance coverage disputes - with no ties to insurance companies and has no conflicts of interest. Clients include Fortune 1000 companies, small and medium-sized businesses, governmental entities, and nonprofits as well as personal estates. Based in New York City, the firm also has offices in Philadelphia, PA, Stamford, CT, Washington, DC, Newark, NJ and Los Angeles, CA.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions