Have you ever received one of those annoying telemarketing calls during dinner time? Chances are that you have, as this has been a common sales tactic in recent years. In order to address what was perceived as a growing unsolicited telemarketing problem, Congress enacted the Telephone Consumer Protection Act (TCPA) in 1991.
The goal of the TCPA was to restrict the use of telephone marketing and automatic dialing system calls to residences and cell phones, as well as the use of text messages and unsolicited faxes. The TCPA’s restrictions vary depending upon whether the call is made to a wireless or residential line, and if the call is informational or conveys a telemarketing or advertising message. If a call is meant as an advertisement or includes telemarketing, then express consent for the same must be granted in writing. A private right of action is granted under the statute with potential damages of up to $500 per violation, or up to $1,500 if willful.
In light of the potential damages available under the TCPA, there has been a recent uptick in the number of private lawsuits, as well as class action cases involving the statute. In fact, several recent cases have garnered multi-million dollar settlements. Capital One recently settled a TCPA claim for $75 million, including payment of plaintiff’s attorneys’ fees.
However, the subject of insurance coverage for these types of claims remains as unsettling as the dinnertime telemarketing call itself.
Defendants in a TCPA action have traditionally sought coverage for this type of claim under the advertising injury or property damage coverage in their General Liability policy. Several courts have argued that there is no coverage for these claims because they are styled as penalties under the statute. Other courts have disagreed as to whether the violation of the TCPA amounts to a violation of the right to privacy dependent upon whether the right to privacy includes the right to seclusion. While some policy holders have had success with this argument, many General Liability carriers are now including a specific exclusion in their policies to address these claims. As a result, policyholders are looking elsewhere for coverage. Specifically, many are turning to their E&O and D&O policies, with limited success.
If the alleged wrongful act that gave rise to the alleged TCPA violation was committed while in the course of performance of professional services, it may be possible to seek coverage for the claim under an Errors and Omissions policy. However, this is largely dependent upon the type of professional services in which the insured engages. Furthermore, in light of the broad entity coverage provided, several recent cases have also addressed whether private company D&O policies provide coverage for TCPA claims.
For example, in a notable case involving the Los Angeles Lakers (currently on appeal in the 9th Circuit), one Lakers “fan” brought a class action suit against the basketball franchise arising from an invitation to game attendees which would feature text messages on the scoreboard during the game. After sending his own text, the fan received a promotional text in return, which resulted in a charge from the fan’s cellular phone company. The Lakers sought coverage for the class action suit under their D&O insurance policy. However, the carrier denied coverage for the claim, based on an invasion of privacy exclusion contained in the policy. The Lakers appealed, arguing that the court’s analysis of the exclusion was overly broad, as the class action complaint did not specifically contain an invasion of privacy allegation.
In a similar TCPA class action case against the Los Angeles Clippers that was settled in 2014, the settling class members received game tickets and concession credits, while Plaintiffs attorneys received over $600,000 in fees and costs. It’s no wonder that the TCPA is big business for plaintiffs’ lawyers. As a result, many D&O carriers are likewise adding specific exclusions to their policies to preclude coverage for TCPA claims.
Until insurance coverage law for TCPA matters becomes more settled, it remains important to review your D&O policy for any applicable TCPA or invasion of privacy exclusions. Furthermore, a knowledgeable insurance broker may be able to negotiate a Side-A carve-back, or defense costs coverage for these types of actions. Lastly, the next time you receive one of those pesky dinner-time calls….start talking insurance coverage. It will be interesting to see who hangs up the phone first.