Closing the Coverage Gap?: California Supreme Court Set to Decide Whether Privacy Right Implicated by the TCPA Triggers Insurance Coverage for “Advertising Injury”
The California Supreme Court recently granted the Ninth Circuit’s request for certification to determine whether a TCPA claim against a policyholder for sending unsolicited text message constitutes a claim for personal injury arising out of “oral or written publication of material that violates a person’s right of privacy.” The crux of the issue is whether such personal injury coverage requires a violation of secrecy with regard to third parties or merely a violation of one’s right to seclusion. Courts across the country are divided on the scope of this type of personal injury coverage, so a ruling from the California Supreme Court may be a guidepost for other states as well.
In Yahoo! Inc. v. National Union Fire Insurance Co. of Pittsburgh, Pennsylvania, 913 F.3d 923 (9th Cir. 2019), the Ninth Circuit addressed two cases under California law potentially in conflict with one another as to the type of privacy right addressed in personal injury liability coverage, ACS Systems, Inc. v. St. Paul Fire & Marine Insurance Co., 53 Cal. Rptr. 3d 786 (Cal. Ct. App. 2007), and State Farm General Insurance Co. v. JT’s Frames, Inc., 104 Cal. Rptr. 3d 573 (Cal. Ct. App. 2010). The cases analyzed different policy language for the same concepts (advertising injury), but both cases found no coverage.
The court in ACS Systems limited a liability policy’s advertising injury coverage to protecting the right to secrecy—and did not extend the coverage to a right to seclusion. The policy language in ACS Systems defined advertising injury as “[m]aking known to any person or organization written or spoken material that violates an individual’s right of privacy; the court accordingly interpreted the injured party as “one whose private material is made known.”
The court in JT’s Frames considered different policy language—the standard advertising injury coverage for injury arising from “oral or written publication of material that violates a person’s right of privacy”—and still held that there was no coverage for TCPA liability. The JT’s Frames court found that the material at issue must violate a person’s right to privacy to trigger coverage; it is not enough that the publication violate the privacy right.
Many liability policies include standard language affording coverage to “injury . . . arising out of . . . [o]ral or written publication . . . of material that violates a person’s right of privacy.” The Ninth Circuit recognized that insurance coverage questions arise frequently in the TCPA context given the nature of the claims: “Because the TCPA does not implicate violations of the right to secrecy, insurance coverage of TCPA liability turns on whether ‘publication . . . of material that violates a person’s right of privacy’ applies to the right to secrecy, seclusion, or both.”
The Ninth Circuit thus found that it “need[ed] guidance in applying California’s rules” and submitted a certified question to the California Supreme Court, asking:
Does a commercial liability policy that covers “personal injury,” defined as “injury . . . arising out of . . . [o]ral or written publication . . . of material that violates a person’s right of privacy,” trigger the insurer’s duty to defend the insured against a claim that the insured violated the Telephone Consumer Protection Act by sending unsolicited text message advertisements that did not reveal any private information?
The California Supreme Court has granted the certification request, but the parties have not yet briefed the issue before the court. The court could hold that the personal injury coverage applies broadly to any privacy right, including the right to seclusion, or alternatively rule that personal injury coverage is relevant only to secrecy and confidential information.
In certifying the question, the Ninth Circuit noted that the case would affect “the many class actions involving TCPA claims against insureds . . . and the large amounts of potential liability at stake.” Given the massive judgments and settlements in some TCPA class actions, disputes over whether insurance covers a defendant’s liability are particularly important and have a significant impact on TCPA defendants both in terms of defense costs and ultimate liability. So this is one to watch.