As class action filings under the Telephone Consumer Protection Act (TCPA) have continued to rise, so too have the number of disputes with commercial liability insurers over coverage for their insureds’ alleged TCPA violations. Whether TCPA defendants can seek coverage from liability insurers to defend and indemnify them for TCPA-related exposure often depends on the specific language of the policy at issue, including the policy’s stated coverage exclusions. In one recent decision, an Illinois appeals court ruled that a professional liability insurer has no duty to defend or indemnify an insurance agent in a class action alleging that the agent sent thousands of prerecorded telephone messages advertising the agent’s services for selling life, accident and health insurance. The court affirmed the lower court’s decision that telephone solicitations did not constitute negligent acts, errors or omissions “rendering services for others,” as required for coverage under the policy. Margulis v. BCS Insurance Co., No. 1-14-0286 (Ill. App. Nov. 26, 2014).
The case arose in 2008 when the plaintiff filed a class action complaint in Missouri state court against an insurance agent and broker that allegedly transmitted automated telephone solicitations to more than 180,000 unique telephone numbers. The complaint alleged that the defendant’s automated marketing calls violated the TCPA because they were made without the recipients’ prior express consent. At the time of the original action, the defendant sought coverage from its professional liability insurer, which was denied. In 2011, the Missouri state court approved a class action settlement of $4,999,999. As part of the settlement, the parties agreed, and the court approved, that the plaintiff would attempt to collect on the judgment “only from the proceeds of the insurance policies and claims against Defendant's insurer(s)." Shortly thereafter, the plaintiff filed a declaratory judgment action in Illinois against the defendant’s professional liability insurer seeking an order that the insurer had a duty to pay the judgment.
The trial court granted the insurer’s motion for summary judgment, and the appeals court affirmed. Both courts held that there was no coverage because “the automated telephone calls at issue did not constitute negligent acts, errors or omissions by [the insurance agent] arising out of the conduct of [the agent’s] business in ‘rendering services for others’ as a licensed insurance agent, general agent or broker.” The appeals court agreed with the professional liability insurer that the insurance agent’s solicitation of business from members of the general public did not involve the provision of services as a licensed life, accident and health insurance agent and therefore did not fall within the scope of coverage.
The plaintiff argued that the lower court impermissibly construed ambiguous policy language narrowly, rather than broadly, and asked the court to find a duty to defend and indemnify. The insurer countered that the plaintiff was “ignoring the key passage” in the policy, i.e., that the action arise out of the conduct “in rendering services for others.” The court held that the policy was unambiguous, and that the insurance agent “was not rendering services for the call recipients as an agent or broker where, as here, the recipients were not [the insurance agent’s] clients or customers.” The lack of an established business relationship was therefore fatal to the plaintiff’s claim for coverage under this policy. The court distinguished several other cases involving professional and commercial liability policies with dissimilar language to the policy at issue in this case. See Landmark American Insurance Co. v. NIP Group, Inc., 2011 Ill. App (1st) 101155 (2011);Valley Forge Insurance Co. v. Swiderski Electronics, Inc., 223 Ill. 2d 352 (2006).
Insurance coverage issues for underlying TCPA claims continue to generate litigation, and these cases are yet another outgrowth of the ongoing wave of TCPA class action filings. Commercial liability insurers often file declaratory judgment actions against their insureds seeking a declaration that there is no coverage for underlying TCPA claims. In other situations, as in the case discussed above, plaintiffs in underlying TCPA litigation may pursue claims against commercial and professional liability insurers after agreeing to settlements that are to be satisfied exclusively from the proceeds of a defendant’s insurance policies.
The policy language at issue in these cases can vary significantly. Increasingly, commercial liability policies may contain a specific exclusion for TCPA claims.See James River Ins. Co. v. Med Waste Mgmt., No. 1:13-cv-23608, 2014 WL 4749551 (S.D. Fla., Sept. 22, 2014) (denying coverage based on a TCPA exclusion). Other commercial liability policies may have more general exclusions that can preclude coverage for TCPA claims. See Nat’l Union Fire Ins. Co. of Pittsburgh, Pa. v. Papa John’s Int’l, No. 3:12-cv-00677, 2014 WL 2993825 (W.D. Ky., July 3, 2014) (finding no coverage where the policy contained an exclusion for any loss resulting from a violation of a “statute, ordinance or regulation of any federal, state, or local government”). With TCPA class actions continuing to be filed at a record pace, there will be ongoing issues over the scope of commercial liability coverage for these claims.