Owners Insurance Co. v. European Auto Works, Inc.,
(8th Cir. Sept 17, 2012)
In this case, the plaintiff insurer brought a declaratory judgment action seeking an order stating that it owed no coverage to the defendant policyholder in the underlying case. In the underlying case, the defendant auto repair company faced a state court action brought by Percic Enterprises, Inc, which alleged violations of the Telephone Consumer Protection Act (TCPA) for sending unsolicited fax advertisements. The policyholder faxed out 5,000 unsolicited “junk” faxes to prospective customers in 2005. Some of the recipients had not consented to receive such faxes, and brought a class action suit against the policyholder.
The insurers defended the policyholder in the underlying action under a reservation of rights. While the underlying state class action suit was pending, the insurers brought a declaratory judgment action in federal district court seeking a determination that the claims at issue were not covered under the polices. While the declaratory judgment action was pending, a settlement of around $2 million was reached in the underlying action. Afterwards, the federal district court heard the declaratory judgment action and concluded that the TCPA violations were covered under the advertising injury provision in the policies.
The plaintiff insurers appealed and argued that such claims did not fall within the policy provisions for “advertising injury” or “property damage.” The 8th Circuit stated that the primary issue was whether there was coverage under the “advertising injury” provision, which explicitly covers “oral or written publication of material that violates a person’s right of privacy.” The insurer argued that the privacy provision only covered secrecy based torts that punish disclosure or private information about someone other than the recipient of the information and not the other type of privacy, the intrusion of solitude.
The court noted that the majority of circuits which have considered the same privacy provision related to TCPA violations had held that the phrase is not limited to secrecy based privacy violations and TCPA violations are covered. The court also noted that some courts, including the 7th Circuit, had found that TCPA violations were not covered under similar policy provisions. Ultimately, while applying Minnesota law, the court found that the ordinary meaning of the term “right of privacy” easily included violations of the type of privacy interest protected by the TCPA. Moreover, the court found that the dissemination of fax advertisements were publications and therefore covered under the advertising injury provision. Therefore, the court affirmed the district court’s decision and found that the insurer owed coverage.