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Insurance Coverage Notes and Developments

Do TCPA Claims Trigger CGL Coverage? The California Supreme Court Agrees to Decide

Do TCPA Claims Trigger CGL Coverage? The California Supreme Court Agrees to Decide

The California Supreme Court has agreed to decide for the first time whether class actions alleging violations of the Telephone Consumer Protection Act (“TCPA”)—which prohibits certain unsolicited fax, telephone or text message advertisements—are covered by a CGL insurance policy. See Yahoo! Inc. v. National Union Fire Ins. Co. of Pittsburgh, Pa., Case No. S253593 (Cal. S. Ct., March 27, 2019). The Ninth Circuit asked the California Supreme Court to resolve the issue as a certified question of unresolved state law. See Yahoo! Inc. v. National Union Fire Ins. Co. of Pittsburgh, Pa., 913 F.3d 923, 926 (9th Cir. 2019).

Courts nationwide have disagreed on whether TCPA violations are covered as “advertising injury,” which is often defined to include “oral or written publication of material that violates a person’s right of privacy.” The debate generally has turned on whether TCPA violations impact the kind of privacy right subject to advertising injury coverage. In American States Insurance Co. v. Capital Associates of Jackson County, Inc., 392 F.3d 939, 940 (7th Cir. 2004), the court noted that “privacy” can mean either “secrecy” or “seclusion,” and the court found that the TCPA protects privacy “in the sense of seclusion” because “an unexpected fax, like a jangling telephone or a knock on the door, can disrupt a householder’s peace and quiet.”  Id. at 942. The court then determined that “privacy” in the context of the policy’s definition of advertising injury “is limited to secrecy interests.”  Id. The court reasoned that the policy “covers a ‘publication’ that violates a right of privacy,” and that, “[i]n a secrecy situation, publication matters; otherwise secrecy is maintained,” whereas “[i]n a seclusion situation, publication is irrelevant.”  Id. Some other courts also have held that TCPA violations are not “publication of material that violates a person’s right of privacy.”  E.g., Auto-Owners Ins. Co. v. Stevens & Ricci, Inc., 835 F.3d 388, 408-09 (3d Cir. 2016).

Many courts have disagreed with American States and its progeny, however, holding that TCPA violations are “publication of material that violates a person’s right of privacy.” Those courts generally have determined that the right of privacy includes both the right to secrecy and the right to seclusion, see, e.g., Valley Forge Ins. Co. v. Swiderski Elecs., Inc., 860 N.E.2d 307, 317 (Ill. 2006), and have found that “the plain meaning of ‘publication’ is broad enough to include the dissemination of fax advertisements.” Owners Ins. Co. v. European Auto Works, Inc., 695 F.3d 814, 819 (8th Cir. 2012); see also Penzer v. Transp. Ins. Co., 29 So. 3d 1000, 1005-06 (Fla. 2010).

Although courts have split over advertising injury coverage for TCPA violations when interpreting the phrase “publication of material that violates a person’s right to privacy,” they have unanimously agreed that TCPA violations are not covered by policies with a different definition of “advertising injury.” In Cynosure, Inc. v. St. Paul Fire & Marine Insurance Co., the policy defined “advertising injury” to include “making known to any person or organization covered material that violates a person’s right of privacy.” 645 F.3d 1, 2 (1st Cir. 2011) (emphasis added). The court held that TCPA violations did not fall within this definition, finding “remarkable differences” between the “making known” provision in the subject policy and the “publication” provision in the policies in American States and Valley Forge, among others. Id. at 3. Furthermore, the court indicated its understanding that “every case” dealing with “making-known policy language” has held that TCPA violations are not covered advertising injury. See id. at 4 (citing Res. Bankshares Corp. v. St. Paul Mercury Ins. Co., 407 F.3d 631, 641 (4th Cir. 2005); Melrose Hotel Co. v. St. Paul Fire & Marine Ins. Co., 432 F. Supp. 2d 488, 503 (E.D. Pa. 2006), aff’d 503 F.3d 339 (3d Cir. 2007); St. Paul Fire & Marine Ins. Co. v. Onvia, Inc., 2007 WL 564075 (W.D. Wash. Feb. 16, 2007), aff’d, 301 Fed. Appx. 707 (9th Cir. 2008)).

Turning back to California, whether TCPA violations were covered by CGL insurance appeared to be well-settled in that jurisdiction until the Ninth Circuit declared it “an important and unresolved question of state law.”  Yahoo!, 913 F.3d at 924.  In ACS Systems, Inc. v. St. Paul Fire & Marine Insurance Co., 53 Cal. Rptr. 3d 786, 798 (Cal. Ct. App. 2007), a California appellate court held that a policy with the “making known” language in the advertising injury definition did not provide coverage for TCPA violations, noting that cases without that language were distinguishable. Subsequently, however, another California appellate court found the distinction between “publication” and “making known” to be “one without a difference.”  JT’s Frames, Inc., 104 Cal. Rptr. 3d 573, 587 (Cal. Ct. App. 2010). Although the subject policy defined advertising injury as “publication” of material violating the right to privacy, the court relied upon ACS Systems and other precedent finding no coverage for TCPA claims under policies defining the term as “making known” material violating the right to privacy, because, in the court’s view, the distinction “consists of a word substituted for a synonymous phrase.”  Id. The Ninth Circuit’s certified question to the California Supreme Court in Yahoo! could resolve this issue conclusively under California law.

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