The Ninth Circuit in L.A. Lakers v. Federal Ins. Co., No. 15-55777 (9th Cir. August 23, 2017), ruled that a D&O policy’s invasion of privacy exclusion barred coverage for a claim alleging that the insured violated the Telephone Consumer Protection Act (“TCPA”). The plaintiff in the TCPA case alleged that he had responded via text to a message on the scoreboard while attending a Lakers’ game and that the Lakers sent him a response text message using an “automated telephone dialing system,” in violation of the TCPA. The Lakers’ insurer denied coverage for the TCPA lawsuit, and coverage litigation ensued.
The district court granted the insurer’s motion to dismiss the insured’s complaint for breach of contract and bad faith in its entirety, reasoning that TCPA claims are “implicit invasion-of-privacy claims” that are explicitly excluded by the Policy. The Ninth Circuit agreed, finding that Congress stated that the purpose of the TCPA is to protect individuals against invasions of privacy. Thus, according to the Ninth Circuit, a liability insurance policy that unequivocally and broadly excludes coverage for invasion of privacy claims also excludes coverage for TCPA claims. The court accordingly held that the insurer had no duty to defend or indemnify the Lakers against the TCPA claim.
The Ninth Circuit found that the plain language of the Policy “clearly excludes from coverage claims ‘based upon, arising from, or in consequence of…invasion of privacy,’” and that California law consistently affords a broad interpretation to “arising from” and “based on” language in an insurance contract. In examining the “invasion of privacy” exclusion, the Ninth Circuit looked at California’s “four distinct forms of tortious invasion of privacy.” The court concluded that receiving unwanted calls falls within the tortious “intrusion upon the plaintiff’s seclusion or solitude,” also described as “the right to be let alone.”
The insured argued that an invasion of privacy is only one of the harms that the TCPA is intended to protect against. The Ninth Circuit disagreed and pointed to two sections (Sections 227(b)(2)(B) and 227(b)(2)(C)) where the TCPA explicitly describes “the privacy rights this section is intended to protect.” The Ninth Circuit noted that the TCPA contains no other statement regarding its intended purpose, and “that the purpose of the TCPA is to protect privacy rights and privacy rights alone.” The court also rejected the insured’s argument that the claimant was only seeking economic injury – not personal injury, which is the traditional relief for an invasion of privacy claim – holding that “a TCPA claim is an invasion of privacy claim, regardless of the type of relief sought. Moreover, we will not allow [the claimant] to redefine the TCPA by disclaiming any recovery for personal injury.”
The Ninth Circuit declined to address whether a holding that a TCPA claim is inherently an invasion of privacy claim prevents corporations (who do not have the same privacy interests as individuals) from obtaining relief under the TCPA. But it did suggest that the states should determine whether a corporation can seek or obtain relief under the TCPA.
It is worth noting this was a divided court. Judge Smith penned the opinion. Judge Murphy concurred in affirming the district court’s opinion but wrote separately to state that the court should not have concluded that a TCPA claim is inherently an invasion of privacy claim. Judge Tallman dissented, arguing that a TCPA claim is not automatically a privacy claim.