A federal court in Kentucky has held that coverage for claims arising out of an insured’s use of an advertising company to send text message advertisements to consumers was excluded under various CGL policies.  National Union Fire Ins. Co. of Pittsburgh, Pa. v. Papa John’s International, Inc. 2014 WL 2993825 (W.D. Ky. July 3, 2014).

The insured allegedly encouraged franchisees to use an advertising company that sent text messages to consumers.  The insured was then sued in a class action for alleged violations of various statutes including the Telephone Consumer Protection Act (TCPA).  Its insurers denied that the suit asserted claims for property damage, bodily injury or personal and advertising injury and also denied coverage under an exclusion for “Violation of Statutes in Connection With Sending, Transmitting, or Communicating any Material or Information.”  The insurers filed an action for declaratory judgment, and the parties filed cross-motions for summary judgment.

The court granted the insurers’ motion.  It ruled that coverage for “personal and advertising injury,” defined in part as “invasion of the right of privacy,” was triggered, rejecting the insurers’ argument that “right of privacy” is synonymous with the right of secrecy and adopting the majority position that it means the “right to seclusion.”  It held that the alleged TCPA violations constituted an invasion of the right to seclusion and therefore, a “personal and advertising injury.”  However, the court held that coverage was barred under the policies’ exclusion of claims arising out of … “any act that violates any statute ... that … applies to the sending, transmitting or communicating of any material or information, by any means whatsoever.”  It rejected the insured’s arguments that the exclusion rendered coverage illusory and violated the reasonable expectations of the policyholder.  The exclusion did not render coverage illusory because it does not entirely negate coverage of personal and advertising injury.  The insured’s reasonable expectations were deemed to be irrelevant because the exclusion was not ambiguous.