Privacy Exclusion Protects Insurer from $60 Million Class Action

A federal judge in Florida has ruled that a policy exclusion for invasion of privacy claims relieved an insurer of any responsibility for a $60 million settlement against a Boca Raton company for violations of the Telephone Consumer Protection Act.

Liberty International Underwriters, a division of Liberty Mutual, was granted a summary judgment against plaintiffs looking to collect on a class action settlement they obtained from iCan Benefit Group for violating the TCPA by sending them unsolicited advertisements by text.

The U.S District Court in the Southern District of Florida agreed with the insurer that there was no coverage and barred the plaintiffs from recovering the settlement or defense costs from Liberty.

The court concluded that Liberty’s Private Advantage policy’s broad exclusion barring coverage for claims “arising out of” an actual or alleged invasion of privacy precluded coverage for iCan entirely.

After Liberty denied coverage for the TCPA claims by those receiving iCan’s unwanted autodialed text messages on their cellular telephones, health insurance broker iCan settled the class action for $60 million. The plaintiffs then received an assignment of iCan’s rights and interests in the Liberty insurance policy and sought to collect from the insurer.

The dispute led to cross-motions for summary judgment, with plaintiffs arguing wrongful denial of coverage and Liberty arguing that there was no coverage because of its invasion of privacy exclusion.

The Liberty exclusion in the policy providing coverages for directors and officers and employment practices read in part that the insurer would not be liable for a loss on account of any claim made against its insured that is “based upon, arising out of, or attributable to any actual or alleged defamation, invasion of privacy, wrongful entry and eviction, false arrest or imprisonment, malicious prosecution, abuse of process, assault, battery or loss of consortium.”

Liberty argued that since its policy broadly defined “claim” as a “civil proceeding” and the class action alleged TCPA violations that caused actual harm in the form of invasions of privacy, among other harms, the entire lawsuit “arises out of” an invasion of privacy.

But plaintiffs contended that the exclusion was inapplicable because there were other allegations in addition to invasion of privacy within the complaint against iCan, that the invasions of privacy were just one part of the underlying case. Plaintiffs also argued that they did not have to prove invasion of privacy in order to prevail in the class action since it is not an element of the TCPA cause of action.

U.S. District Judge Robin L. Rosenberg determined that the question for the court was whether the underlying complaint, or some component of it, is a claim, which arose out of an invasion of privacy.

The judge cites several precedents supporting the idea that a violation of the TCPA may in some circumstances be considered an invasion of privacy when analyzing insurance coverage.

The Florida Supreme Court’s analysis of the nexus between the TCPA and invasion of privacy in Penzer v. Transportation Insurance Company in 2010 found the “source of the right of privacy is the TCPA, which provides the privacy right to seclusion” …and that “the stated purpose of the TCPA…is to protect the privacy of individuals…” in a case involving the faxing of unsolicited advertisements.

The court also looked at a 2017 Ninth Circuit case — Los Angeles Lakers, Inc. v. Federal Insurance Company — which evaluated the precise question of whether an exclusion from coverage of suits arising from an invasion of privacy also includes suits arising from TCPA violations. This court concluded that because a “TCPA claim is inherently an invasion of privacy claim,” TCPA claims fell under the policy’s exclusionary clause.

The Eighth Circuit Court of Appeals also looked at the relationship between the TCPA and invasion of privacy in Universal Underwriters Insurance Co. v. Lou Fusz Automotive Network in 2005. This court examined whether an insurance policy that defined an “injury” as including “invasion[s] of rights of privacy” covered a lawsuit alleging TCPA violations. Like the Florida Supreme Court and the Ninth Circuit, this court concluded that “it is clear that Congress viewed violations of the Act as ‘private nuisances’ and as ‘invasions of privacy’ under ordinary, lay meanings of these phrases.”

The Eastern District of Virginia also concluded that a policy exclusion for “invasion of privacy” included TCPA claims in Resource Bank v. Progressive Casualty Insurance Co.

According to Rosenberg, it is important that the Liberty policy excludes claims that “arise out of” an invasion of privacy because, she noted, the Florida Supreme Court has held that the words “arising out of” in an insurance policy are unambiguous and absolute in scope.

Coupling the case law that interprets TCPA violations as invasions of privacy with Florida’s interpretation of “arising out of,” the court found that the TCPA violations at issue in the iCan matter arise out of an invasion of privacy and therefore are excluded from coverage under Liberty’s privacy exclusion.

The court also considered whether the entire iCan claim is excluded from coverage or whether just those aspects of the underlying case that involve invasion of privacy are excluded. The court noted that the plaintiffs expressly alleged invasion of privacy as a basis for their lawsuit and thus the claim includes allegations that the iCan plaintiffs suffered the harm of invasion of privacy. But even if the broad definition of claim did not preclude coverage over the entirety of the underlying action, the plaintiffs failed to allocate the settlement agreement between covered and uncovered claims as required by Florida law, Rosenberg added.

“Florida law is well-settled that the party seeking coverage for a settlement has the burden of proving that the settlement is covered under the insurance policy,” the decision stated.