An insurance policy exclusion for invasion of privacy claims precludes coverage for the L.A. Lakers in a Telephone Consumer Protection Act (TCPA) suit, according to a divided panel ruling by the US Court of Appeals for the Ninth Circuit in L.A. Lakers v. Federal Ins. Co., 15-55777 (9th Cir. Aug. 23, 2017). The three-judge panel was deeply split. One judge concluded that TCPA claims are inherently privacy claims, another judge strongly disagreed and a third judge cast the deciding vote on much narrower grounds. The split decision leaves open questions regarding the relationship between TCPA claims and invasion of privacy claims in the context of coverage exclusions, and implicates larger questions about the underlying purpose of the TCPA.
The underlying TCPA action alleged that the Los Angeles Lakers encouraged fans to send a text to a specific number, which generated an automated response text that allegedly violated the TCPA. The underlying TCPA case was settled, but an insurance coverage dispute lingered on after the team’s insurance carrier denied coverage under a directors and officers insurance policy based on an exclusion for invasion of privacy claims. The team sued the carrier for breach of contract. A federal district court ruled in favor of the insurance carrier and dismissed the suit, holding that TCPA claims are “implicit invasion-of-privacy claims” and squarely within the policy’s “broad exclusionary clause” for invasion of privacy.
Although this is a coverage dispute, the underlying question of whether TCPA claims are inherently invasion of privacy claims has broader implications. On appeal, two of the three judges on the Ninth Circuit panel confronted the issue directly. Judge N.R. Smith, who authored the decision, concluded broadly that “a TCPA claim is a privacy claim, regardless of the type of relief sought” and that “a plaintiff asserts an invasion of privacy claim when he or she asserts a TCPA claim.” In an analysis of the purpose of the statute, Judge Smith observed that “the TCPA twice explicitly states that it is intended to protect privacy rights” and stated that the statute protects “privacy rights alone.” Accordingly, a coverage exclusion for invasion of privacy precluded coverage for TCPA suits.
In dissent, Judge Richard Tallman strongly disagreed, stating the he would have ruled that “a TCPA claim is not automatically a privacy claim.” According to Judge Tallman, judges should look to the elements of a statutory cause of action, and “not what motivated enactment of the statute.” And because the statutory elements of the TCPA say nothing about privacy, a statutory TCPA claim should not be recast as a privacy claim. The judge noted that this interpretation is bolstered by the fact that, in his view, the TCPA was enacted to do more than simply protect call recipients’ privacy.
The deciding vote fell to Judge Stephen Murphy who viewed the issue in the case more narrowly. Because the complaint in the underlying case mentioned invasion of privacy in several places, Judge Murphy opined that the case stemmed from an alleged invasion of privacy and fell within the scope of the exclusion. But Judge Murphy stated that the court “need not hold more broadly that a TCPA claim is inherently an invasion of privacy claim.”
The decision is a loss for the insured in this case, but the split panel decision leaves open the broader question of the relationship between TCPA claims and privacy claims. This relationship is likely to continue to be a disputed issue, particularly in the context of insurance coverage disputes.
Although an increasing number of policies include specific TCPA exclusions, TCPA claims have been a frequent source of insurance coverage disputes in recent years. Whether TCPA defendants may seek coverage from liability insurers to defend and indemnify them for TCPA-related exposure depends on the specific language of the policy at issue and the stated coverage exclusions. As the trend of high-dollar class action settlements continues to spur a wave of TCPA case filings, defendants in these cases should review their various insurance policies and understand how certain exclusions may affect coverage.