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In its recent decision in OneBeacon Am. Ins. Co. v. Urban Outfitters, 2015 U.S. App. LEXIS 16399, [subscribers can access an enhanced version of this opinion: lexis.com | Lexis Advance] (3d Cir.), the United States Court of Appeals for the Third Circuit, applying Pennsylvania law, had occasion to consider what constitutes the offense of “publication of material that violates a person’s right of privacy,” for the purpose of personal and advertising injury coverage under a general liability policy.
At issue before the court was coverage for three putative class actions lawsuits brought against Urban Outfitters and its subsidiary Anthropologie concerning their collection of customers’ data. Although each of the suits alleged that the stores improperly requested and collected zip code information from its customers, the suits contained varying allegations as to how this information was used. One suit alleged that the Urban Outfitters and Anthropologie merely collected the data for use in future direct marketing efforts. A second suit contained similar allegations, but also alleged that the stores made the information available to third party vendors for use in other direct marketing campaigns, such conduct being in violation of various privacy laws. Finally, the third lawsuit alleged that the information actually was used by the stores for targeted junk mail efforts.
Urban Outfitters and Anthropologie sought coverage for the lawsuits under a series of four successively primary general liability policies issued by OneBeacon, with the last being a fronted policy in which Hanover Insurance Group was the true insurer. On motion for summary judgment, the United States District for the Eastern District of Pennsylvania held that the insurers had no duty to defend or indemnify the suits for a variety of reasons, each of which was later addressed by the Third Circuit.
With respect to the suit alleging only that the customers’ zip code information was collected for future direct marketing campaigns, the Third Circuit agreed that the suit did not allege any “publication” of material that violated a person’s right of privacy. In so concluding, the court agreed with the insurers that publication, at a minimum, requires some degree of dissemination to the public. Merely collecting data, concluded the court, did not satisfy this threshold requirement.
While the second underlying suit alleged that the customers’ zip code information was shared with third-parties, thus constituting publication, the court nevertheless found applicable the policies’ exclusion titled “Recording And Distribution Of Material Or Information In Violation Of Law.” This exclusion barred coverage for “’Personal and advertising injury’ arising directly or indirectly out of any action or omission that violates or is alleged to violate . . . [a]ny federal, state or local statute, ordinance or regulation . . . that addresses, prohibits, or limits the printing, dissemination, disposal, collecting, recording, sending, transmitting, communicating or distribution of material or information.” The court agreed that because the underlying suit alleged that the insureds violated the Song-Beverly Credit Card Act, the exclusion applied to preclude any defense or indemnity obligations.
Finally, the court agreed that no coverage obligation was owed with respect to the third suit alleging that the insureds actually used its customers’ data for purposes of a junk mail effort. The court observed that under Pennsylvania law, the personal injury offense of publication of material in violation of a person’s right of privacy pertains to one’s right of secrecy, not the right to seclusion. As such, the court agreed that material sent by the insureds to its customers that is merely harassing, but does not disclose confidential information to third-parties, does not qualify as a personal injury offense. As the court explained, the lawsuit “does not assert harms based on the plaintiffs’ interests in keeping their ZIP codes secret.”
Brian Margolies, Partner, Traub Lieberman Straus & Shrewsberry LLP
Read more at the Traub Lieberman Insurance Law Blog, Edited by Brian Margolies.
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