Insurance Law

Insurance May Cover Call Recording Class Actions

By John Green

Companies often monitor or record conversations between their employees and customers for training or quality control purposes. California law prohibits monitoring or recording unless both parties consent. Class actions have been brought against a number of companies alleging that calls were routinely recorded without customer consent. These claims may be covered by a company’s general liability (CGL) policy.

CGL policies generally provide coverage for “personal injury” offenses, which are defined to include “oral or written publication of material that violates a person’s right of privacy.” Call recording is prohibited by California’s Invasion of Privacy Act, which was enacted to protect “the right of privacy of the people of this state.” Cal. Penal Code § 630, [enhanced version available to lexis.com subscribers]. Thus, call recording claims fall within the Personal Injury coverage for “privacy” claims.

Insurers sometimes contend that the policy only applies to “publication” of material that violates a right of privacy, and recording a call is not “publication.” The very act of recording the conversation, however, is a publication The term “publication” is not defined in the policy, but dictionaries define the term to mean the production of material in a fixed medium which becomes available for review; it does not require actual review of the material. A book, for example, is a publication, regardless of whether anyone actually reads it. Thus, there is “publication” immediately upon the creation of the recording, since it is a depiction in a fixed medium and available for review. See also Encore Receivable Management, Inc. v. ACE Property and Casualty Insurance Company, 2013 U.S. Dist. LEXIS 93513 (S.D. Ohio, July 3, 2013),[enhanced version available to lexis.com subscribers],(“the initial dissemination of the conversation constitutes a publication at the very moment that the conversation is disseminated or transmitted to the recording device.”); Ribas v. Clark, 38 Cal. 3d 355, 360-61 (1985) (describing the violation as the “simultaneous dissemination to an unannounced second auditor, whether that auditor be a person or mechanical device.”). Thus, the recording by itself satisfies any “publication” requirement.

In any event, this is usually an academic debate, since the calls are recorded for the express purpose of later review, and any subsequent re-play would clearly be a publication. Insurers sometimes contend that the playing of recorded calls within the company is not “publication.” The law, however, is to the contrary. See, e.g., Kelly v. Gen. Tel. Co., 136 Cal.App.3d 278, 284 (1982), [enhanced version available to lexis.com subscribers],(communication to employees constitutes “publication” for purposes of slander); Lenscrafters, Inc. v. Liberty Mutual Fire Insurance Company, 2005 U.S. Dist. LEXIS 47185, [enhanced version available to lexis.com subscribers], (disclosure of confidential information to other employees is “publication” under CGL policy privacy coverage).

Insurers also take the position the claims are not covered on the ground that the claim is not for money damages, but only penalties. The Act, however, specifically provides for damages. Section 637.2(b) states that any party bringing an action may “seek damages as provided by subdivision (a).” (Emphasis added.) Subdivision (a) provides that damages are the greater of:

  1. Five thousand dollars ($5,000).
  2. Three times the amount of actual damages. . .

Thus, the minimum award of $5,000 is “damages,” not a penalty, and plaintiffs may also seek “actual damages” in a greater amount if they exceed the minimum.

Insureds should carefully review their policies as insurers sometimes include an endorsement excluding call recording claims. In the absence of an express exclusion, however, these claims are covered by the company’s CGL policy.

 

    By John Green, Partner, Farella Braun + Martel LLP

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