As many practitioners who work with the Telephone Consumer Protection Act (TCPA) know, getting insurance providers to cover TCPA cases is a difficult proposition. The Ninth Circuit recently affirmed this notion in Los Angeles Lakers, Inc. v. Fed. Ins. Co., No. 15-55777, 2017 WL 3613340, at *2 (9th Cir. Aug. 23, 2017) (LA Lakers), swatting away the Lakers’ appeal of a dismissal of their suit against their insurance carrier for denying coverage of a TCPA action.
The underlying case tipped off with a preseason Lakers game against the Utah Jazz in October 2012. The plaintiff, David Emanuel, was in attendance and saw a message on the scoreboard inviting fans to text a specific number so that fans’ messages might be displayed. Emanuel did so and received the following message to his phone: “Thnx! Txt as many times as u like. Not all msgs go on screen. Txt ALERTS for Lakers News alerts. Msg&Data Rates May Apply. Txt STOP to quit. Txt INFO for info”(LA Lakers, at *2). Soon after, Emanuel, on behalf of himself and others similarly situated, brought a class action suit against the Lakers alleging that the response text message was sent using an “automated telephone dialing system” (ATDS) in violation of the TCPA. Id.
In response to the complaint, the Lakers asked their insurance provider, the Federal Insurance Company (Federal), to defend them against the lawsuit. Based on a clause in the insurance contract excluding claims “based upon, arising from, or in consequence of… invasion of privacy”, Federal denied coverage and, like the Lakers in 2016, declined to defend. Id. Subsequently, the Lakers filed suit in Los Angeles Superior Court asserting two claims for relief: first, for breach of contract, alleging that Federal had violated the policy by denying coverage, and; second, for tortious breach of implied covenant of good faith and fair dealing based on the same denial. Id. After removing to federal court, Federal filed a motion to dismiss for failure to state a claim. The district court granted the motion and dismissed the case without giving the Lakers leave to amend, finding that the “Lakers could not succeed in the suit under any cognizable legal theory, because TCPA claims are ‘implicit invasion-of-privacy claims’ that fall squarely within the Policy’s ‘broad exclusionary clause.’” Id., at *3 (quoting Los Angeles Lakers, Inc. v. Fed. Ins. Co., No. CV 14-7743 DMG SHX (C.D. Cal. Apr. 17, 2015), aff’d, No. 15-55777, 2017 WL 3613340 (9th Cir. Aug. 23, 2017)).
On appeal, the Ninth Circuit affirmed in a 2-1 decision. The Court found that “[b]ecause a TCPA claim is inherently an invasion of privacy claim, Federal correctly concluded that Emanuel’s TCPA claims fell under the Policy’s broad exclusionary clause.” Id., at *8. In reaching this conclusion, the Court looked to the purpose of the TCPA itself, noting that the statute “twice explicitly states that it is intended to protect privacy rights… [and] contains no other statement regarding its intended purpose.” Id., at *5. Thus, the Court concluded that “the purpose of the TCPA is to protect privacy rights and privacy rights alone.” Id. As a result, once a plaintiff establishes the three necessary elements of a TCPA claim – that “(1) the defendant called a cellular telephone number; (2) using an automatic telephone dialing system; (3) without the recipient’s prior express consent” – he or she has proven an invasion of privacy. Id., at 6.
The Court specifically shut down the Lakers’ argument that Federal had a duty to defend because the plaintiff could have amended the complaint to state a covered liability. The Lakers’ position was two-fold: first, the plaintiff claimed he “suffered multiple harms, not just an invasion of privacy,” and; second, he only sought recovery for “economic injury” rather than “personal injury”, which is generally the form of injury alleged in invasion of privacy cases. Id., at 7. The Court did not buy this argument, finding that “a TCPA claim is an invasion of privacy claim, regardless of the type of relief sought” Id. As a result, there was “no potential” that Emanuel could have amended his complaint to assert a claim for relief that would have been covered under Federal’s policy. Id., at 8.
In concurrence, Judge Stephen Murphy III explained that he would have affirmed the dismissal on narrower grounds. Because the plaintiff specifically alleged that the message the Lakers sent him was an invasion of privacy, Judge Murphy found the claim arose from an invasion of privacy. Judge Murphy stated that “[t]he Court need not hold more broadly that a TCPA claim is inherently an invasion of privacy claim. Id., at *8.
In dissent, Judge Richard Tallman concluded that Emanuel’s claims did not fall under the privacy exclusion of the policy because a TCPA action does not necessarily constitute an invasion of privacy action. Judge Tallman wrote: “Because nothing within the words Congress chose suggests that a TCPA plaintiff must prove invasion of privacy, a TCPA claim is not automatically a privacy claim. And because Emanuel expressly disavowed his privacy claims and instead sought recovery under the TCPA, his claims were not common law privacy claims. They were statutory TCPA claims.” Id., at *8.
The Ninth Circuit’s decision is similar to the conclusion that some courts have reached, that the claimed invasion of privacy that comes with getting texted or called on one’s cell phone can establish an injury for Article III standing purposes. See, e.g., Holderread v. Ford Motor Credit Company, LLC, No. 4:16-cv-00222, 2016 WL 6248707, at *3 (E.D. Tex. Oct. 26, 2016) (“an invasion of privacy within the context of the TCPA constitutes a concrete harm that meets the injury-in-fact requirements” of Article III); but see, e.g., Romero v. Department Stores Nat’l Bank, 199 F. Supp. 3d 1256, 1262 (S.D. Cal. 2016) (stating that invasion of privacy is itself a separate tort, and not an injury that can be used to claim standing for a TCPA claim). The invasion of privacy that some courts find can arise from a TCPA violation can ultimately result in a double whammy: not only might a court use that “invasion of privacy” to find a concrete injury establishing Article III standing to bring a claim in federal court, but the LA Lakers decision now allows insurers to use that to reject coverage based on fairly typical exclusionary language in their policies.
As the LA Lakers case reflects, getting insurance providers to cover TCPA cases is not an easy task. As a result, it is important to review compliance with the TCPA on an ongoing basis to ensure that if there is a claim, you will not be caught holding the ball after the shot clock buzzes with an insurance provider denying you coverage.