Blast-Faxes Trigger CGL Coverage
Penzer v. Transportation Ins. Co., 2010 WL 308043 (Fla.), stems from plaintiff Penzer's 2003 filing of a class action suit in a Florida state court against Nextel South Corporation alleging that Nextel or one of its agents sent him an unsolicited facsimile advertisement in violation of the Telephone Consumer Protection Act (TCPA). Nextel filed a third-party complaint against Sunbelt, a blast-fax advertiser, and Southeast Wireless, an authorized agent of Nextel, seeking indemnity and contributions for any liability Nextel may have in the class action. Nextel also alleged that Southeast Wireless hired Sunbelt to create the advertisement and that Nextel did not authorize the fax transmissions.
Penzer then filed a third-party complaint against Southeast Wireless, and Southeast Wireless requested that Transportation Insurance Company, its commercial liability insurer, defend it in the class action. Transportation refused to provide a defense for the class action suit or the Nextel complaint, and also disclaimed any coverage on various grounds.
Thereafter, Penzer entered into a settlement agreement with Southeast Wireless in which Penzer agreed to release Southeast Wireless from any liability, and Southeast Wireless consented to a judgment and assigned its right to seek insurance coverage from Transportation to Penzer. The state court approved the settlement and certified a settlement class. Penzer then pursued a declaratory judgment action against Transportation in the U.S. District Court for the Southern District of Florida, wherein Transportation defended that, based upon the language of the policy, Transportation had no obligation to defend or indemnify Southeast Wireless.
The insurance policy at issue provided coverage for advertising injuries. The district court found that Transportation did not have a duty to indemnify the plaintiffs for Southeast's violations of the TCPA because the policy language was not ambiguous and that “advertising injury coverage under this provision exists only when the content of the material published violates a person's right to privacy.”
Penzer appealed the district court's decision to the Eleventh Circuit, which concluded that neither the policy exclusions nor Florida public policy led to denial of coverage. However, the Eleventh Circuit also found that the disposition of this case rested on an unsettled issue of Florida law and that “[a] pure legal question of the interpretation of widely used language in commercial liability insurance is at issue.” Accordingly, it certified its question to the Florida Supreme Court.
In disagreeing with the federal district court, the Supreme Court of Florida unanimously ruled that under Florida law, such TCPA infringements triggered coverage. The court concluded that the plain meaning of the policy provision, which provided coverage for a written publication of material that violates a person's right to privacy, provided coverage for sending unsolicited fax advertisements in violation of the TCPA.
Editor's Note: In 2005 ISO introduced endorsement CG 00 67, which was meant to exclude bodily injury, property damage, and personal and advertising injury arising out of any action or omission that violates or is alleged to violate the TCPA, the CAN-SPAM Act of 2003, or any other similar statute, ordinance, or regulation that prohibits or limits the sending, transmitting, communicating, or distribution of material or information. The December 2007 revision of the CGL form incorporated this endorsement wording into the CGL form itself in the exclusion sections of both coverage A and coverage B. Under coverage A, exclusion q. applies to the distribution of material in violation of statutes and under coverage B, exclusion p. does the same. (Endorsement CG 00 67 was withdrawn from use due to this action.)