Federal Telephone Consumer Protection Act (“TCPA”) litigation continues despite the U.S. Supreme Court’s 2021 ruling in Facebook, Inc. v. Duguid, 141 S Ct. 1163 (2021). For any business, just the cost of defending against a single TCPA action can be substantial.
In theory at least, insurance could be available to cover those costs. Coverage for TCPA claims, however, is often expressly excluded from both commercial general liability (“CGL”) and cyber insurance policies.
The Supreme Court of California’s recent ruling in Yahoo Inc. v. National Union Fire Insurance Company of Pittsburgh, Pa., No. S253593 (Nov. 17, 2022), provides some hope, though, that – at least when TCPA claims are not otherwise explicitly excluded from coverage – CGL insurance may be available in certain circumstances at least for the defense of TCPA cases.
Granting a request by the U.S. Court of Appeals for the Ninth Circuit (the “Ninth Circuit”), the California Supreme Court agreed to consider a certified “question of state law” in Yahoo. Specifically, the state’s highest court considered whether “a commercial general liability insurance policy that provides coverage for ‘personal injury,’ defined as ‘injury … arising out of … [o]ral or written publication, in any manner, of material that violates a person’s right of privacy,’ … trigger[s] the insurer’s duty to defend the insured against a claim that the insured violated the [TCPA] … by sending unsolicited text message advertisements that did not reveal any private information” (quotations omitted) (footnote omitted).
At bottom, the court had to decide whether the phrase “that violates a person’s right to privacy,” as used in the relevant policy, modified only “material” or whether it modified the term “publication,” such that there would be coverage for claims involving text messages that allegedly interfere with a recipient’s right to seclusion regardless the content of the texts.
Notably, the policy at issue was relatively unique in that it included an endorsement that “removed the exclusion for injuries arising from violation of the TCPA” (footnote omitted).
Considering the specific policy before it, the California Supreme Court ultimately found the relevant language to be ambiguous. “Because the provision is ambiguous, … it must be interpreted in a way that fulfills [the policyholder’s] objectively reasonable expectations, which must be determined in further litigation,” the court stated. It also noted “the rule that ambiguities are to be resolved against the drafter, and here the insurer is considered to be the drafter of the specific coverage language whose meaning is in dispute.”
The court explained: “The restrictive clause ‘that violates a person’s right of privacy’ can reasonably be read to modify the entire phrase ‘[o]ral or written publication, in any manner, of material,’ and the standard rules of contract interpretation do not foreclose that reading” (footnote omitted).
In other words, it was, at a minimum, reasonable to read the relevant policy as covering claims for any publication that intrudes on a policyholder’s right of seclusion regardless the content of the publication.
The court seemingly did leave open, however, the possibility that no coverage may be owed in this case based on application of the so-called “advertising injury exclusion.” It stated, in relevant part: “In the proceedings up to this point, … [the insurer] has not litigated the case based on the advertising injury exclusion, and the record before us does not indicate whether the text messages at issue here were advertisements as that term is defined in the policy. Accordingly, we express no view on the question.”
In the end, the California Supreme Court “answer[ed] the Ninth Circuit’s question as follows:”
A CGL insurance policy that provides coverage for “personal injury,” defined, in part, as “injury … arising out of … [o]ral or written publication, in any manner, of material that violates a person’s right of privacy,” can cover liability for violations of the right of seclusion if such coverage is consistent with the insured’s objectively reasonable expectations. Such a policy can also trigger the insurer’s duty to defend the insured against a claim that the insured violated the TCPA by sending unsolicited text messages that did not reveal any private or secret information, provided that the alleged TCPA violation amounts to a right-of seclusion violation under California law. The fact that such a policy has been modified by an endorsement with regard to advertising injuries may affect such coverage and such duty to defend, but we have no occasion to decide that issue here.
To be sure, this policyholder-friendly outcome is predicated on California law and the specific language of the policy at issue. As such, it may not directly have wide application (at least not outside of California). The decision is still a significant one, however. For one, it outlines a common-sense approach to finding coverage under a CGL policy for TCPA claims – an approach that other courts in other jurisdictions can follow. It also at least arguably increases the overall potential for coverage under CGL policies for cyber-related claims more generally, which, of course, would benefit policyholders too.
Additionally, this decision serves as an important reminder to policyholders everywhere to not just assume that no coverage exists for a TCPA claim. Instead, if and when sued for allegedly violating the TCPA, policyholders should carefully review their CGL policies, as well as their cyber (and potentially other) policies. The language of their policies will control. (Even if a policy generally provides no coverage for TCPA claims, it may, for example, still afford a small sub-limit for the cost of defending against such actions.) As the California Supreme Court just demonstrated, specific policy language matters.
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