Recently, the California Supreme Court accepted a certified question from the Ninth Circuit concerning insurance coverage for claims arising under the Telephone Consumer Protection Act (TCPA). The Court will determine whether, under California law, a commercial liability policy that covers personal injury includes coverage for claims that an insured violated TCPA by sending unsolicited text messages that did not reveal any private information.
In Yahoo! Inc. v. National Union Fire Insurance Company of Pittsburgh, Pennsylvania, No. 17-16452 (9th Cir. 2019), Yahoo! bought five consecutive one-year policies for commercial general liability insurance from National Union. The insurance policies consisted of a standard policy form, but also contained an endorsement that modified the standard form in three key ways:
- While the standard policy “excluded personal and advertising injury arising from the distribution of material in violation of the TCPA” this endorsement deleted that express exclusion.
- It limited the scope of coverage for “personal injury” to cover injuries resulting from: (a) False arrest, detention, or imprisonment; (b) Malicious prosecution; (c) The wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling or premises that a person occupies, committed by or on behalf of its owner, landlord or lessor; (d) Oral or written publication, in any manner, of material that slanders or libels a person or organization or disparages a person’s or organization’s goods, products or services; or (e) Oral or written publication, in any manner, of material that violates a person’s right of privacy.
- The endorsement excludes coverage for “advertising injury” which is defined as injury arising from: (a) oral or written publication, in any manner, of material in your “advertisement” that slanders or libels a person or organization or disparages a person’s or organization’s goods, products or services; (b) Oral or written publication, in any manner, of material in your “advertisement” that violates a person’s right of privacy; (c) The use of another’s advertising idea in your “advertisement”; or (d) Infringing upon another’s copyright, trade dress or slogan in your “advertisement.”
Ultimately, Yahoo! was a defendant in five class-action lawsuits while the National Union policies were in effect: two in California, two in Illinois, and one in Pennsylvania. All five suits alleged that Yahoo! violated the TCPA by sending unsolicited text messages to the class action members. Yahoo! sought coverage from National Union to defend it in the class action lawsuits. When National Union refused to tender a defense, Yahoo! brought suit for breach of contract. In 2017, the Northern District Court of California granted National Union’s motion to dismiss, and Yahoo! appealed.
There is currently split law at the Ninth Circuit on the issue that the courts faced in Yahoo!’s case. In ACS Systems Inc. v. St. Paul Fire & Marine Insurance Co., 147 Cal. App. 4th 137 (2007), the policy in question only covered “advertising injury” and the specific injury in question was “making known to any person or organization written or spoken material that violates an individual’s right of privacy.” Here, the court determined that the injury was to the party whose private material was made known, not the one to whom information was made known. Therefore, the court concluded that TCPA claims were not covered under the policy because “the recipient of an unauthorized advertising fax has no claim that ‘material that violates an individual’s right of privacy’ has been ‘made known’ to a third party.”
However, also in ACC Systems, the court noted that other policies that did not define “right of privacy” or “oral or written communication” could include coverage for TCPA claims. In contrast, though, in State Farm Gen. Insurance v. JT’s Frames Inc., 181 Cal. App. 4th 429 (2010), the Ninth Circuit looked at policy language that did define advertising injury as “oral or written publication of material that violates a person’s right of privacy” and held the opposite of whatthe court said in ACC Systems: that the language did not cover TCPA violations. Here, the court applied the “last antecedent” of construction rule, which provides that “qualifying words, phrases and clauses are to be applied to the words or phrases immediately preceding and are not to be construed as extending to or including others more remote.” Under this rule, the phrase “violates a person’s right of privacy” modifies “material” not the word “publication.” Therefore, the court reasoned that it is not the “publication” that violates the right of privacy, but the disclosure of confidential information. The court held then that “to come within the policies’ definition of ‘advertising injury,’ the material at issue must violate a person’s right to privacy” and to violate a person’s right to privacy, the material would need to be confidential information.
Given the leading case law in the Ninth Circuit, it is clear why the court is seeking clarification on the issue. The court stated it certified this question “because of its significance to the many class actions involving TCPA claims against insureds with these policies and the large amounts of potential liability at stake.” Currently, both parties are filing amicus curiae briefs, and the California Supreme Court is slated to answer the certified question within the year.