Commercial Insurance Policies Could Provide Protection for Businesses Facing Suits Under the Telephone Consumer Protection Act

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[author: Barry Buchman]

In one of the latest decisions to address the continuing debate over whether there is coverage under commercial general liability (CGL) insurance policies for so-called “blast fax” and “blast texting” lawsuits brought under the Telephone Consumer Protection Act (TCPA), a Wisconsin appellate court has ruled in favor of coverage.  See  Sawyer v. West Bend Mut. Ins. Co.,  2012 WL 2742291 (Wis. App. July 10, 2012).  In doing so, the court rejected the recurring insurance industry argument that CGL policies cover only invasion of privacy lawsuits that involve the alleged publication of the plaintiffs’ secrets; the court held that CGL policies also cover invasion of privacy lawsuits that allege a violation of the right to seclusion, i.e., the right to be left alone, which is typically the issue in “blast fax” and “blast texting” claims.

Although some commentators have suggested that decisions like this one likely will have no effect on disputes arising under newer CGL policies, which typically have TCPA exclusions, that is not necessarily so.

“Blast fax” and “blast texting” lawsuits frequently allege both statutory, TCPA claims and common law claims.  For the purpose of getting coverage at least for the costs of defending such lawsuits, as long as there is at least one covered claim or theory of liability, insurance companies often will have to pay all defense costs unless and until the policyholder is adjudicated liable only on the uncovered claims.  At least one court has issued exactly such a ruling in a dispute over coverage for blast fax claims in which the policies had a TCPA exclusion.  And, if the policyholder settles the lawsuit, there is, of course, never an adjudication of liability based only on the uncovered claims.  Thus, policyholders may be able to get coverage for such settlements, because it often will be difficult to establish that the policyholder settled the case solely due to concern about the uncovered claims.

Further, if an insurance company did not give proper notice to its policyholder of the addition of the TCPA exclusion to the CGL policy, that might provide a way around the exclusion as well.  And, other policies that an insured company may have, such as errors and omissions policies and directors and officers policies, may have exclusions that are narrower, i.e., that exclude less coverage, than the exclusions in CGL policies.

Thus, CGL and other commercial insurance policies continue to be a potentially very valuable source of protection for businesses facing TCPA lawsuits.  Businesses, therefore, should be willing to challenge coverage denials from their insurers if appropriate after an analysis of all of the circumstances, including the particular policy language and the particular underlying lawsuits.