Unsolicited Fax Outside CGL Policy's Advertising Injury Coverage

 

Auto-Owners Ins. Co. v. Websolv Computing, Inc., 2009 WL 2750263 [C.A.7 (Ill.)] involved the interpretation of an “advertising injury” clause in a CGL policy. The insured, Websolv, was sued in Illinois state court for sending an unsolicited fax advertisement to a dental office. Websolv tendered the defense of the suit to its insurer, Auto-Owners Insurance Company, which accepted it under a reservation of rights. Auto-Owners then filed an action in federal court seeking a declaratory judgment that it had no duty to defend Websolv in the underlying Illinois suit. The United States District Court for the Northern District of Illinois found in favor of the insured, and the insurer appealed.

 

After determining that Iowa law-not Illinois law-should apply in the case, the Seventh Circuit court of Appeals held that the insurance policy did not require Auto-Owners to defend Websolv in the underlying suit.

 

In its decision, the court explained that the insured's sending of the fax allegedly in violation of the Telephone Consumer Protection Act was outside the CGL policy's advertising injury coverage for violations of a person's seclusion-based right of privacy through “publication” of oral or written material. According to the court, the policy used the word “publication” in the advertising injury definition to narrow the scope of “privacy rights” to secrecy-based rights, and the other provisions of the advertising injury definition focused on harm arising from the content of an advertisement, rather than the harm arising from the mere receipt of an advertisement.

 

In addition, under Iowa law, the underlying claim for property damage against the insured, based on the use of ink and paper from the recipient's fax machine by the insured's fax, fell within the CGL policy's exclusion for property damage that was expected or intended from the standpoint of the insured. According to the court, the consequences of sending the fax were both expected and intended by insured.

 

Therefore, the court reversed the decision of the district court and remanded with instructions to enter summary judgment in favor of Auto-Owners.