On January 15, 2019, the Ninth Circuit certified the following question to the California Supreme Court:
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 rights 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 advertisement that did not reveal any private information?
Yahoo! Inc. v. National Union Fire Insurance Company of Pittsburgh, Pa., No. 17-16452, D.C. No. 5:17-cv-0447-NC.
Yahoo! sought coverage under its general liability policies issued by National Union for a number of putative class actions alleging that it violated the TCPA by transmitting unsolicited text message advertisements to putative class members. National Union denied coverage and Yahoo! sued for breach of contract. The Northern District granted National Union’s motion to dismiss and Yahoo! appealed that order to the Ninth Circuit.
This case implicated arcane rules of policy construction, the type that fascinate coverage lawyers and mystify others. In certifying the question, Ninth Circuit noted that there was a split in authority from California appellate courts, so it was difficult to predict how the Supreme Court would decide the question. In ACS Systems, Inc. v. St. Paul Fire & Marine Ins., 53 Cal. Rptr. 3d 786, 794-95 (Ct.App.2007) the District found that TCPA claims were not covered under the policy at issue because the coverage required that the offending material be “made known” to any person or organization, i.e., a third party. That court distinguished out-of-state decisions finding coverage for TCPA violations by noting that those policies did not require that the information be “made known.” Like those out-of-state cases, Yahoo!’s general liability policies did not require that the information be “made known” to a third party. So, by implication, the ACS court would have ruled in favor of Yahoo!
However, in State Farm v. JT’s Frame, 104 Cal. Rptr. 3d 573, 585 (Ct.App.2010), the Fifth District found that even without the “made known” qualifier, this policy language did not cover TCPA violation. The court relied on the “last antecedent rule” of construction, which provide that qualifiers are applied to the closest term in the phrase, and not those removed. Thus, when construing the provision “injury…arising out of oral or written publication of material that violates a person’s right of privacy,” the first antecedent rule would determine that the phrase “that violates a person’s right to privacy” modifies “material” rather than “publication.” So, the court reasoned it is not the intrusion (the “publication”) which violates the right of privacy, but disclosure of confidential information. The fact that the consumer experienced the invasion of their privacy by texts which presumably transmitted material and interrupted the recipient’s solitude or family time did not trigger coverage under this interpretation. It did not reveal private information regarding the recipient or a third party.
Courts in other states, however, do not follow the “last antecedent” rule, and have found that material can violate a right of privacy even if it simply invades the plaintiff’s seclusion, as opposed to discloses confidential information. See Penzer v. Transp. Ins., 29 So.3d 1000, 1007 (Fla. 2010) (clause could apply to “publication”); Owner’s Ins. v. European Auto Works, Inc., 695 F.3d 814, 821 (8th Cir. 2012); Cynosure, Inc. v. St. Paul Fire and Marine Ins., 645 F.3d 1, 5, n.3 (1st Cir. 2011). Moreover, the Ninth Circuit noted that the JT’s Frames court looked at the provision in the context of an advertising, as opposed to personal injury, coverage, finding that the offending material must be “in” an advertisement, i.e., the fact that the intrusion alone is offensive does not trigger coverage. Of course, personal injury does not contain such qualifiers.
The Ninth Circuit certified this question “because of its significance to the many class actions involving TCPA claims against insureds with these policies and the large amounts of potential liability at stake.” Many insurers now explicitly exclude coverage for TCPA actions from coverage under their policies, however, so, the Supreme Court’s decision eventually may have less impact on TCPA actions as this exclusion takes root. It may, however, provide guidance in the application of the “last antecedent rule” and whether this rule overrides other principals of policy interpretation, as well as whether other forms of the invasion of the right to seclusion torts can be covered under the personal and advertising injury coverage provided in CGL policies.