By John S. Vishneski, III and Robert Deegan, Attorneys, Reed Smith LLP
The Telephone Consumer Protection Act (the "TCPA"), 47 U.S.C. § 227, et seq., protects consumers from unwanted calls, faxes, and text messages. This commentary first looks at insurance coverage claims relating to the TCPA. When faced with suits under the TCPA, defendant companies most frequently seek defense and indemnity under Coverage A ("property damage") and Coverage B ("personal and advertising injury") of their Commercial General Liability ("CGL") policies. In general, insureds have argued that the receipt of an unsolicited fax or text intrudes on the privacy of the recipient - triggering the "invasion of privacy" offense under Coverage B. Regarding Coverage A, insureds have argued that unsolicited faxes use ink and toner from the recipient's fax machine and generally cause "wear and tear" to the fax machine - resulting in property damage.
The commentary then analyzes trends in how the courts have ruled on those claims (including newly decided cases). Many courts have declined to find coverage under Coverage A, holding that even when an unsolicited fax results in "property damage," such damage was caused intentionally by the policyholder because the policyholder intended that the fax be transmitted and received. There are, however, some recent cases that support coverage and the commentary discusses them.
Courts are split with respect to coverage for advertising injury based on violation of privacy from unsolicited faxes and text messages. The commentary shows how the decisions may be differentiated based on the courts' interpretation of "privacy" interests under the relevant policies. It further analyzes the potentially seminal Northern District of Illinois decision of Maxum Indem. Co. v. Eclipse Mfg. Co., finding that businesses have no privacy interests in seclusion. The commentary finds, "[T]he reasoning discussed in Maxum may potentially undermine the availability of coverage for TCPA claims going forward under CGL policies."
Insurers have begun adding TCPA exclusions to CGL policies, often through endorsements provided at renewal. This process is ongoing, and even today not all CGL policies contain TCPA exclusions. The commentary notes, "For policyholders who are subject to such exclusions, however, two potentially productive lines of analysis may be available - one disputing the process by which the exclusion was added, the other focusing on alternative sources of coverage." The commentary explores those lines of analysis.
John S. Vishneski, III is a partner and Robert C. Deegan is an associate at Reed Smith LLP in Chicago, IL. Both are members of the firm's Insurance Recovery Practice Group. Mr. Vishneski and Mr. Deegan represent policyholders in disputes with their insurance companies.
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