Invasion of Privacy and the TCPA
The insured office supply company brought an action seeking a declaration that its insurer had a duty to defend the insured due to a class action lawsuit brought against the insured under the Telephone Consumer Protection Act (TCPA). A court of common pleas in Pennsylvania granted the insurer judgment on the pleadings and the case was appealed to the Superior Court of Pennsylvania. This case is Telecommunications Network Design and Paradise Distributing, Inc. v. The Brethren Mutual Insurance Company, 2010 WL 3294319 (Pa.Super.).
Paradise Distributing was an office supply company that supplied fax machine paper, toner, and supplies. Over a period of time, Paradise transmitted over one million unsolicited advertising faxes. Telecommunications Network Design (TND) was the recipient of one of these faxes. TND filed a class action lawsuit under the TCPA. Paradise gave the lawsuit to its insurer, The Brethen, for defense and indemnification. The insurer declined coverage. Paradise and TND settled the underlying action and agreed that the judgment was to be satisfied only from the proceeds of the Brethren insurance policies.
Paradise and TND filed a declaratory judgment action but the trial court ruled in favor of the insurer and said The Brethren had no duty to defend the insured.
Upon appeal, the insured contended that its actions fell within the advertising injury clause of the policy, specifically the clause that includes “oral or written publication of material that violates a person's right of privacy”. The insured contended this is so because TND's complaint arose under the TCPA, and the junk fax ban contained within the TCPA protects privacy rights. The insurer disagreed and said the duty to defend pursuant to the advertising clause is triggered only if the content of the faxed material violates the privacy of the recipient.
The appeals court noted that this was an issue of first impression for Pennsylvania . It then discussed numerous state and federal courts that have considered whether violations of the TCPA are covered by insurance policies. After a review of this case law, the appeals court accepted a certain ruling of the U.S. District Court for the Eastern District of Pennsylvania that concluded that there was no duty to defend.
Agreeing with the analysis of the U.S. District Court, the appeals court said that the underlying complaint in this case did not reference an invasion of privacy. Rather, the complaint alleged that the unsolicited faxes imposed costs without authorization on the class members by using their paper, ink, and equipment. The court said that the TCPA was enacted to protect privacy, but it was not enacted because of concerns about the private nature of the content of the materials sent by fax. Rather, the law was motivated by concern for the intrusion caused by unsolicited faxes. TCPA was enacted to protect one's right to be let alone, that is, the right to seclusion, rather than protecting against the disclosure of personal or private information.
Then, comparing the complaint with the provisions of the policy, the court stated that the advertising injury clause was clear and unambiguous and Paradise's actions are not covered by that provision of the policy. When the term “privacy” is read within the context of the policy provisions, it was clear to the court that the term is confined to secrecy interests. The offenses listed in the definition of advertising injury refer to the content of the material covered by the policy. Terms like “libel”, “slander”, and other words specifically focus on the message contained in the covered materials. None of these words address the intrusive nature of the method used to convey the message; the focus is on the content of the message itself.
In this case, the underlying action did not complain about the content of the faxes; it focused on the monetary costs caused by the depletion of class members' resources that resulted from the unauthorized faxes. While the complaint did contain a TCPA claim, it addresses the privacy interests that arise from one's right to be left alone. This is not the privacy interest addressed and covered by the advertising injury clause of the policy.
The ruling of the trial court was affirmed.
Editor's Note: In a case of first impression, this Pennsylvania Appeals Court addresses an issue that has been in doubt ever since the TCPA was passed. Courts from around the country have been faced with the question of whether the CGL form applies when a claim is made against the insured based on violating the TCPA, especially when the claim involves sending advertisements via fax machine. This court ruled that the privacy that the TCPA protects refers to the content of the material and not to the way the message was sent. And, the fact that the court lists numerous cases (both state and federal) that have tackled the TCPA/CGL form questions makes this case very worthwhile.