A recent decision by the Ninth Circuit is sure to catch the eye of insurers for its favorable reasoning rejecting coverage as well as a potential warning sign that policyholders are seeking coverage for Telephone Consumer Protection Act (TCPA) suits beyond CGL policies. In Los Angeles Lakers, Inc. v. Federal Insurance Company, No. 15-55777, 2017 WL 3613340 (9th Cir. Aug. 23, 2017), the Ninth Circuit determined there was no coverage for violations of the TCPA under a D&O policy. In short, by analyzing the purpose of the TCPA, the Ninth Circuit reasoned that there could be no coverage when a policy included exclusionary language for invasion of privacy claims.
The coverage dispute arose when a spectator at the Staples Center viewing a Los Angeles Lakers game sent a text message to a number that flashed on the scoreboard inviting people to send messages that would perhaps later be displayed on the scoreboard. In response to the text, the spectator received an automated message. About a month after the game, the spectator filed a class action lawsuit against the Lakers alleging that message he received violated the TCPA. The Lakers then sought coverage under a directors and officers policy. The D&O insurer denied the claim based on an exclusion in the policy for claims arising from invasions of privacy. The Lakers then filed a coverage action challenging the denial. The insurer filed a motion to dismiss on the grounds that the invasion of privacy exclusion applied, and the trial court granted the insurer’s motion.
On appeal, the Ninth Circuit affirmed. In so holding, the court first stated that the term “arising out of” in exclusions is given broad interpretation. Therefore, the exclusion applies if a claim against the insured has only a minimal causal relationship to invasion of privacy.
The court then turned to whether a TCPA claim involves an invasion of privacy. Notably, it was observed that California law recognizes four types of “invasion of privacy,” including the intrusion upon the plaintiff’s seclusion or solitude. The Ninth Circuit determined that the TCPA contained explicit language stating it was intended to protect privacy rights. Therefore, the Ninth Circuit found no difficulty in determining that coverage was precluded for the class action asserting violations of the TCPA due to the exclusionary language regarding invasions of privacy.
This is a significant victory for insurers in the battle against TCPA claims. Due to the broad reasoning of this case as it relates to the purpose of the TCPA, this decision will be particularly useful going forward for insurers in disputes where policies do not contain a separate TCPA exclusion. Indeed, insurers, policyholders, and claimants have litigated similar issues under Coverage B of CGL policies to determine whether TCPA violations constituted invasions of privacy. The Ninth Circuit’s ruling, in conjunction with the advent of TCPA-specific exclusions, suggests that policyholders are facing an increasingly uphill battle in obtaining coverage, in particular under CGL policies. Therefore, as a final takeaway, insurers should be prepared for policyholders and claimants to pivot to other policy lines as their opportunities continue to dwindle under CGL policies.