In Maryland Casualty Co. v. Express Products, Inc., 2011 U.S. Dist. LEXIS 108048 (E.D. Pa. Sept. 22, 2011), the United States District Court for the Eastern District of Pennsylvania considered whether an insured was entitled to coverage under a series of general liability policies for an underlying “blast fax” suit.
The insured, Express Products, Inc. (“Express”), was as a defendant in a class action filed in an Illinois state court alleging violations of the Telephone Consumer Protection Act (“TCPA”) and the Illinois Consumer Fraud Act based on Express’ transmittal of thousands of unsolicited advertisements via facsimile. Express’ insurers, Cumberland Mutual Fire Ins. Co. and Maryland Casualty Company, denied coverage under their respective policies’ property damage coverage (Coverage A) on the basis that the underlying suit did not allege an occurrence. The insurers also denied coverage under their policies’ advertising injury coverage (Coverage B) on the basis that the underlying suit did not fall within the definition of any of enumerated offenses constituting “advertising injury.”
After determining that Pennsylvania law governed the policies, the court turned to the coverage issues under the policies two coverages. In considering Coverage A, the court agreed that the underlying suit alleged property damage “through the use of paper and toner, and the loss of use of tangible property that is not physically injured, by tying up the fax.” The court nevertheless concluded that the underlying suit did not allege property damage arising out of an “occurrence” because the suit alleged that Express intentionally sent the faxes. While the underlying suit did allege that Express knew or should have known that it would cause property damage to the plaintiff class, such an allegation, in and of itself did not preclude a finding of intentional conduct since the suit also alleged that Express intentionally sent unsolicited facsimiles. The court also rejected the insured’s argument that the mere inclusion of the word negligence in the underlying suit triggered a defense obligation. Plaintiffs’ use of this word, explained the court, was to allege that even if Express’ conduct was negligent, its conduct was still in violation of the TCPA. This did not rise to the level of an actual allegation of negligent conduct. The court further held in passing that the policies’ expected and intended exclusions applied, since the complaint alleged that Express sent the facsimiles knowing that such would result in the use of plaintiffs’ fax, toner, paper and ink.
The court further held that the underlying suit did not trigger coverage under the Policies’ advertising injury coverage. The only potentially applicable offense, explained the court, was the offense of “oral or written publication of material that violates a person’s right of privacy.” The court concluded, however, that the underlying suit pertained to Express’ use of plaintiffs’ property (i.e., fax, paper, toner, etc.) and the financial consequences of the such facsimiles rather than plaintiffs’ privacy rights, generally understood under Pennsylvania law to mean “secrecy interests.” Central to the court’s reasoning in this regard was that the underlying suit did not focus on the content of the facsimiles, but rather that they were sent in the first place.