Lawsuits alleging violations of the Telephone Consumer Protection Act ("TCPA") based on allegedly unsolicited text messages have become relatively commonplace.
Such lawsuits often lead to coverage actions in which the sender of texts seeks to recover costs related to the lawsuit from its insurer, often under Directors and Officers (D&O) policies. Courts have been less than uniform in addressing these coverage issues.
In August, the Court of Appeals for the Ninth Circuit took its turn, addressing whether the Los Angeles Lakers were covered under their D&O Policy for an underlying TCPA lawsuit based on text messages. L.A. Lakers, Inc. v. Fed. Ins. Co., No. 15-55777, 2017 WL 3613340 (9th Cir. Aug. 23, 2017).
Unfortunately, by issuing three opinions on very different bases, the Court failed to provide clear guidance to insurers and policyholders alike.
The lead opinion adopted the insurer's broad argument that TCPA claims, by definition, are for invasion of privacy and therefore excluded under the Policy's exclusion of claims, "based upon, arising from, or in consequence of... invasions of privacy." This was based on the determination that Congress' intent in enacting the TCPA was to protect privacy interests. That, combined with the very broad meaning the opinion ascribed to the Privacy Exclusion, meant that there was no coverage.
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The lead opinion's conclusion — but not its reasoning — was joined by a short concurrence that would have ruled on much narrower grounds. The concurrence found that the underlying complaint alleged claims for invasion of privacy because it stated repeatedly that the Lakers' texts had invaded the plaintiff’s privacy. The concurrence would have denied coverage exclusively on that basis, focused on this case only, without seeking to divine the inherent nature of a TCPA claim.
Finally, there was a dissent that would have found coverage, reasoning that the statutory language setting forth the elements of a TCPA claim unambiguously does not require any allegation of invasion of privacy. Consequently, TCPA claims are not per se claims for invasion of privacy, and congressional intent was irrelevant. Moreover, the underlying claims were not based on invasion of privacy because the plaintiff had expressly sought recovery for only the economic injury of allegedly having lost cell phone messaging allowances. Consequently, the Privacy Exclusion did not apply.
What does this mean? At first glance, the breadth of the lead opinion, in characterizing TCPA claims and construing the Privacy Exclusion, appears to favor insurers and make it more difficult for policyholders to get coverage for TCPA claims under their D&O policies. But even the lead opinion leaves room for further argument by, e.g., arguably overstating the breadth of the Privacy Exclusion. Moreover, the concurring opinion agreed with the lead opinion only as to the underlying claim, not as to its broad reasoning. And the dissent reached a conclusion contrary to the lead (and concurring) opinion’s reasoning.
Ultimately, only time will tell how broadly the lead opinion will be applied. Alternatively, the Court of Appeals for the Ninth Circuit may provide clarification.
Despite its apparent breadth, the three opinions taken together do not seem to foreclose policyholder arguments that:
- Not all TCPA claims are for invasion of privacy;
- A specific TCPA claim is not privacy-related; and
- A specific Privacy Exclusion (even one like that at issue in Lakers)is not broad enough to reach the TCPA claim.
In the meantime, in cases of this nature, courts will almost certainly scrutinize the TCPA claims at issue to assess their connection to privacy-related claims as well as the language of the exclusion at issue.
In other words, the ultimate impact of the Ninth Circuit decision may be much more limited than it first appears.
Karin S. Aldama is a partner in the Phoenix office of Perkins Coie LLP. She can reached by sending email to email@example.com.