TCPA Claims Not Covered as Violation of Right to Privacy Under Personal Injury Provision Where There Is No Publication To Third Parties

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In Yahoo! Inc. v. National Union Fire Insurance Company of Pittsburgh, PA  (June 2, 2017) 2017 WL 2405025, the District Court for the Northern District of California addressed the scope of coverage for lawsuits alleging violation of the Telephone Consumer Protection Act, 47 U.S.C. § 227 (“TCPA”), under personal and advertising injury coverage for “oral or written publication, in any manner, of material that violates a person’s right of privacy” contained in a Commercial General Liability policy.

Yahoo! had filed suit against National Union for its denial of coverage for several class action lawsuits alleging violation of the TCPA as a result of Yahoo!’s transmission of unsolicited text messages.  National Union moved to dismiss the Complaint on the grounds that its CGL policies did not cover the class action lawsuits.  Yahoo! argued that the invasion of privacy claims in the class action lawsuits triggered the personal and advertising injury coverage for violation of the “right of privacy.”

In deciding the issue, the District Court first delineated the two types of privacy rights – the right to secrecy and the right to seclusion.  The right to secrecy involves the right to prevent the disclosure of private information to third parties, while the right to seclusion involves the right to be left alone.  The Court noted that “a violation of secrecy privacy involves material being made known to third parties, but violation of seclusion does not.” (2017 WL 2405025 *3 citing ACS Sys., Inc. v. St. Paul Fire and Marine Ins. Co. (2007) 147 Cal.App.4th 137, 154.)  In ACS, the Court held that unsolicited advertisements sent via fax machine in violation of the TCPA were not covered under a policy’s personal and advertising injury coverage.  The Yahoo! Court agreed with the ACS Court in concluding that the personal and advertising injury coverage extends only to violations of “secrecy privacy,” not “seclusion privacy,”  because of the use of the word “publication” in the policy language.   The Court further bolstered this conclusion by noting that the offenses of libel and slander identified in the personal and advertising injury coverage require disclosure to third parties.  As the Court noted, “it is reasonable to infer that the disputed provision also provides coverage only when material is disclosed to third parties.”  (2017 WL 2405025 *5.)

As Yahoo! did not disclose the content of the text messages to anyone other than the recipients, the District Court held that the class actions did not trigger coverage under the personal and advertising injury coverage of National Union’s policies.

The Yahoo! Court expressly declined to adopt the reasoning of  multiple out-of-state decisions cited by Yahoo! that concluded that similar TCPA claims arising from unauthorized communications by telephone or fax are covered under the right of privacy offense under similarly worded personal and advertising injury language.

In general, those cases found potentially  covered personal injury by broadly  interpreting the “right of privacy” to apply to both the right to secrecy and the right to seclusion.   (See, Park University Enterprises, Inc. v. American Cas. Co. Of Reading, PA (10th Cir. 2006) 442 F.3d 1239, 1247 [finding coverage after applying the standard of a reasonable person in the position of the insured under Kansas law to hold that “privacy” includes the right to be left alone]; see also, Collective Brands, Inc. v. National Union Fire Ins. Co. of Pittsburgh, P.A. (D. Kan., Jan. 4, 2013, No. 11-4097-JTM) 2013 WL 66071 [applying Kansas law and the Park holding, and rejecting application of California and Washington law, to find TCPA claims were covered by personal and advertising injury coverage]; Valley Forge Ins. Co. v. Swiderski Electronics, Inc. (2006) 223 Ill.2d 352, 356 [applying the dictionary definition of the term “right of privacy,” which connotes both an interest in seclusion and an interest in the secrecy of personal information, to find TCPA claims covered]; Hooters of Augusta, Inc. v. American Global Ins. Co. (11th Cir. 2005) 157 Fed.Appx. 201, 206–07 [applying Georgia law of contract interpretation and using the ordinary meaning of “privacy” to include a broader layperson’s notion of privacy to find in favor of coverage]; Western Rim Inv. Advisors, Inc. v. Gulf Ins. Co. (N.D. Tex. 2003) 269 F.Supp.2d 836 [finding coverage after applying Texas law to distinguish the term “publication” as used in the context of the offense of defamation from the offense of invasion of privacy rights, which the Court held does not necessarily require publication to third parties].)  The Yahoo! Court distinguished those cases as applying different standards of interpretation than it was required to use under California law.

Although unpublished, the Yahoo! decision may be cited in both state and federal courts in California, along with the ACS decision.  These decision support arguments that there is no personal and advertising injury coverage for TCPA claims in California courts when there are no allegations of dissemination of information to third parties, but merely unwanted communications to the individual plaintiffs-recipients.

Contrary to the often undeserved publicity,  on this issue,  the law in California is developing favorably for insurers than in other jurisdictions across the country.