Why it matters: The provision in a professional liability policy providing coverage for personal injury encompasses a class action alleging privacy violations, according to a federal court in Texas. Gene by Gene, a DNA analysis company, mistakenly published test results on its website without the permission of customers. A consumer class action ensued, alleging the company ran afoul of Alaska's Genetic Privacy Act. When Gene by Gene requested defense of the suit from Evanston Insurance Company, from which it had purchased its professional liability policy, the insurer denied coverage, claiming the privacy violations were not personal injuries, and also relying on a policy exclusion for claims based on statutory violations related to the transmission of information, such as the Telephone Consumer Protection Act. The court disagreed with Evanston, granting summary judgment to the policyholder. The personal injury provision of the policy provided coverage for the underlying litigation, and the exclusion was inapplicable.
Detailed discussion: Gene by Gene owns and operates a genetic genealogy website where users are offered the opportunity to test their genetic information. With DNA test results in hand, they can analyze their genetic information to learn more about their ancestry and connect with other users whose results match in varying degrees.
In May 2014, a putative class action suit was filed against Gene by Gene, accusing the company of improperly publishing DNA test results on its website without the prior consent of users in violation of Alaska's Genetic Privacy Act.
Gene by Gene demanded defense of the lawsuit from its insurer Evanston Insurance Company. Evanston denied coverage, claiming the claims did not constitute a "personal injury" and that a policy exclusion titled "Electronic Data and Distribution of Material in Violation of Statutes" barred coverage. Evanston shortly thereafter filed a declaratory judgment action, and Gene by Gene counterclaimed.
Siding with the policyholder, U.S. District Court Judge David Hittner held that the underlying suit fell within the policy's personal injury coverage, and that the exclusion was inapplicable.
The professional liability policy defined "personal injury" to include "oral or written publication of material that violates a person's right of privacy." The sole claim in the underlying litigation was that Gene by Gene "made the results of [the customers'] DNA analyses publicly available on its own websites," and "disclosed Plaintiff's sensitive information to [a] third-party ancestry company." The court held that the claim in the underlying suits fell within the definition of personal injury because it included the publication of material—the DNA analysis—that allegedly violates a person's right to privacy."
Electronic Data and Distribution of Material in Violation of Statutes Exclusion
Evanston took the position that the "Electronic Data and Distribution of Material in Violation of Statutes" exclusion applied to preclude coverage. The provision eliminated coverage for a claim based upon or arising out of any violation of:
- "the Telephone Consumer Protection Act of 1991 (TCPA) and amendments thereto or any similar or related federal or state statute, law, rule, ordinance, or regulation;
- the CAN-SPAM Act of 2003 and amendments thereto or any similar or related federal or state statute, law, rule, ordinance, or regulation; or
- any other statute, law, rule, ordinance, or regulation that prohibits or limits the sending, transmitting, communication or distribution of information or other material."
The underlying lawsuit was brought pursuant to a statute—the Genetic Privacy Act—that prohibits the transmitting, communication, or distribution of other material in the form of public disclosure of a person's DNA analysis, Evanston argued. Gene by Gene countered that this interpretation of Section (c) of the exclusion was overbroad and unreasonable in the context of the rest of the exclusion and the policy as a whole. Judge Hittner again agreed with Gene by Gene, looking to the canon of construction ofejusdem generis for guidance. The ejusdem generis principle provides that where general words follow specific words in a statutory enumeration and the general words are construed to embrace only objects similar in nature to those objects enumerated by the preceding specific words. The court explained that the TCPA generally regulates the use of unsolicited telephone calls and fax transmissions while CAN-SPAM generally regulates the use of unsolicited, fraudulent, abusive, and deceptive e-mails to consumers. Applying this canon to Section (c), it was therefore reasonable to construe the "or any similar or related" language in Sections (a) and (b) of the exclusion as "meaning any similar or related statutes or laws that govern communication over the phone or fax machine (Section (a)) or e-mail (Section (b)), while Section (c) covers other, similarly unsolicited forms of communication that may be regulated by statute, law, rule, ordinance, or regulation."
Moreover, the court noted that adopting Evanston's construction of Section (c) would render parts of the policy illusory. The advertising injury provision provided coverage for claims arising out of the written publication of material that libels or slanders a person while the personal injury provision included claims arising out of the written publication of material that violates a person's right to privacy.
Finally, even considering Evanston's position as reasonable would lead the court to find the exclusion ambiguous, Judge Hittner said, and the court would then have to apply the alternative reasonable construction offered by the insured.
Having determined that the insurer had a duty to defend and indemnify Gene by Gene under the policies, the court found Evanston breached its contract when it refused to provide coverage to Gene by Gene.
To read the order in Evanston Insurance Company v. Gene by Gene, Ltd., click here.