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Are Insurance Renewal Notifications Telemarketing? Maybe

As discussed here, the Central District of California recently granted summary judgment in favor of an insurance company after finding that a prerecorded call to the insured’s mobile phone, which reminded her to review her health plan options for the following year, was not telemarketing and therefore did not require “prior express written consent.” See Smith v. Blue Shield of Cal. Life & Health Ins. Co., No. SACV 16-00108-CJC-KES (C.D. Cal. Jan. 13, 2017).

But just a few weeks ago, a different judge in the Central District reached the opposite conclusion in a similar case, and denied the defendant’s motion to dismiss. See Flores v. Access Ins. Co., No. 2:15-cv-02883-CAS-AGR (C.D. Cal. Mar. 13, 2017) (available here). These two decisions illustrate how courts continue to grapple with the distinction between “telemarketing” and “informational” calls.

In Smith, plaintiff’s health insurance was scheduled to renew for 2016, and Blue Shield attempted to mail plaintiff a notice before renewal (as required by law) to allow her to review her options, choose different coverage, or otherwise cancel. Slip Op. at 4. The letter was returned as undeliverable. Id. Blue Shield then made a prerecorded call to plaintiff that stated:

It’s time to review your 2016 health plan options and see what’s new. Earlier this month, we mailed you information about your 2016 plan and benefit changes. It compares your current health plan to other options from Blue Shield. You can also find out more online at blueshieldca.com. If you have not received your information packet in the mail, or if you have any questions, please call the number on the back of your member ID card.

Id. Plaintiff later claimed this call was “telemarketing” that required written consent under the TCPA. The court disagreed, viewing the call as “informational,” even if it “encouraged [recipients] to seek out information about their plan by . . . visiting Blue Shield’s website.” Id. at 17.

Flores tells a similar story—but with a different ending. Access Insurance sent the following text message to plaintiff the day before his car insurance was set to expire:

Your Access Auto Insurance policy cancels 01/26/2015. To avoid cancellation, make a payment at [this website]. Reply STOP to Opt-out.

Slip Op. at 1. As in Smith, Plaintiff claimed this text message was “telemarketing” that required written consent. Id. The court found the text had a “dual purpose”: “(1) to alert plaintiff to the expiration of his auto insurance policy; and (2) to encourage plaintiff to renew his policy.” Id. at 13. As the court explained, “the communications had both informational and telemarketing purposes because plaintiff was informed about the status of his policy and was encouraged to purchase services from defendant.” Id. The court was not swayed by the fact that, under California law, insurers must notify policyholders of imminent policy expirations, as the law required notice by mail, not text message. Id. at 10.

Under the TCPA, “telemarketing” is a call made “for the purpose of encouraging the purchase or rental of, or investment in, property, goods, or services . . . .” 47 C.F.R. § 64.1200(f)(12). The Smith decision arguably struck an appropriate balance by finding the call “informational.” But Flores also involved a communication to an existing customer on the brink of a new year of insurance coverage, which notified him that his policy was set to expire. And the communication was required by law (albeit not by text).

So why the different outcome? To be sure, the context was distinct. In Smith, the court based its decision in part on the healthcare context for the call. It noted that under the Health Insurance Portability and Accountability Act (“HIPAA”) and its implementing regulations, the definition of “marketing” was narrower than that under the TCPA and specifically excluded a health insurer’s communications concerning “replacement of, or enhancements to, a health plan.” Slip Op. at 19 (citing 45 C.F.R § 164.501). Perhaps the tone of the message also made an impact. The text in Flores told plaintiff, rather directly, to “make a payment.” Had the text merely invited plaintiff to visit Access’ website so that he could “review his options,” the result might have been different. The procedural posture also could have informed the courts’ rulings. Smith involved a motion for summary judgment, whereas the Flores court ruled on a motion to dismiss—a point the court specifically referenced in its decision: “Plaintiff alleges that defendant’s messages ‘solicit[ed] Plaintiff to renew his auto insurance policy. . . .’ Accordingly, the Court finds that, at this stage, plaintiff has adequately pleaded that defendant’s messages constitute telemarketing.” Slip Op. at 13 n.4 (emphasis added).

These divergent decisions exemplify the case-specific nature of this inquiry. Courts may review a challenged call or text by focusing only on its specific wording to determine whether it is “informational” or “telemarketing.” And although courts may also analyze a particular call in its overall context (for example, HIPAA’s regulatory scheme), they will not necessarily look more broadly at the underlying purpose or intent behind the communication. Indeed, in Smith there was evidence that the content of the call was drafted by Blue Shield’s marketing department. Slip Op. at 4. But the court’s decision turned on the precise words used in the call, as well as consistency with HIPAA’s specific definition of “marketing.”

Flores thus provides a helpful reminder for businesses and their counsel to carefully consider the risk that a call or text may be deemed “telemarketing”—and then obtain the requisite form of consent.

©2018 Drinker Biddle & Reath LLP. All Rights Reserved


About this Author

Matthew J. Adler, Commercial Litigation Attorney, Drinker Biddle, Law Firm

Matthew J. Adler is an associate in the firm’s Commercial Litigation Group. He joined the firm after working two years as a staff attorney for the Supreme Court of California.

Matthew earned his J.D., magna cum laude, from the University of San Francisco School of Law, where he was a staff member of the USF Law Review. While in law school, he served as a judicial extern for the Hon. Kathryn M. Werdegar, Associate Justice of the Supreme Court of California. He spent three years before law school as a paralegal working on products liability cases...

Sheldon Eisenberg, Drinker Biddle, managing partner, litigation, technology

Sheldon Eisenberg is the Regional Partner in Charge of Drinker Biddle’s Los Angeles office, a Managing Partner of the firm, and a partner in the firm’s Litigation Group.  For more than 30 years, members of all sectors of the Southern California economy – from cutting edge technology and telecommunications companies to financial institutions and real estate developers, from Hollywood studios, A List talent, and other entertainment companies, to software developers and publishers, literary and talent agencies, and advertisers and public relations firms – have sought Sheldon’s assistance, advice and counsel for their most significant litigation problems. Sheldon also has extensive experience in the defense of complex class action matters, including his recent defense of CalPERS in a class action involving its long-term care program, a nationwide class action suit regarding the recording of phone calls, and the defense of a class action suit alleging violation of a consumer privacy statute.

Sheldon has successfully represented his diverse group of clients through effective pretrial strategies, well-crafted motions and, when necessary, taking cases to trial in state and federal courts or arbitration. He also has extensive appellate experience around the country, having won cases for clients in matters before the U.S. Courts of Appeals for the Ninth Circuit and the Second Circuit, the California Courts of Appeal, the Nevada and New Mexico Supreme Courts, and the appellate courts of New Jersey.

Justin O. Kay Attorney, Complex Commercial Litigator, Drinker Biddle Law Firm

Justin O. Kay is a partner in the firm’s Commercial Litigation Practice Group. His practice focuses on complex civil matters in federal and state court and before federal agencies.

Justin’s securities litigation practice focuses on defending corporations and individuals in cases involving the federal securities laws and state corporate governance statutes.  His experience includes defending claims involving Rule 10b-5 and Control Person Liability, and tender offer and shareholder derivative litigation.  Justin also represents...