TCPA Suit Falls Within Insurance Invasion of Privacy Exception

May 22, 2015 in TCPA by William Abbey

TCPA Suit Falls Within Invasion of Privacy Exception

After defending and settling a putative class action suit alleging violations of the Telephone Consumer Protection Act, the Los Angeles Lakers attempted to have their insurer, Federal Insurance Co., cover the costs of defending the action. A California court however, sided with Federal Insurance by finding that a TCPA action is by definition an action based on an invasion of privacy and therefore not covered by the Lakers’ insurance policy.

In 2012, David Emmanuel filed the putative class action against the Lakers. The case stemmed from his receipt of an unsolicited text message from the Lakers after he sent a text message to a number to have a message appear on an arena scoreboard during a Lakers game. Emmanuel filed the putative class action in California federal court on behalf of all fans who received a text message in response to their display of a message on the arena scoreboard. The district court dismissed the case finding that the sending of a text message to the Lakers to display a message on the arena scoreboard gave consent for the Lakers to send a follow up text message in response.

Emmanuel appealed the dismissal to the Ninth Circuit Court of Appeals but reached a settlement with the Lakers while the appeal was ongoing. The Lakers then proceeded to file a claim with Federal Insurance for the costs associated with the defense of the litigation. Federal denied the claim stating that an exception in the insurance contract preventing payment for alleged invasions of privacy applied to TCPA suits.

The Lakers sued Federal Insurance over the denied claim alleging that the defense of the TCPA case was not a case based on invasion of privacy, but rather for the alleged annoyance and nuisance of incurring telephone charges or consuming telephone time. The Lakers pointed out that Emmanuel alleged only economic damages and did not request any damages for invasion of privacy. The Lakers further contended that for TCPA cases to be excluded under an insurance policy, an express provision is required.

The Court ruled against the Lakers finding that the TCPA was created to protect consumers against invasions of privacy by preventing unsolicited phone calls and text messages. Even though Emmanuel claimed only economic damages, the Court found that the economic damages stemmed from the Lakers alleged invasion of privacy. The failure to plead invasion of privacy therefore did not eliminate the basis for the economic damages. As such, the Court determined that the case was based on an alleged invasion of privacy and the insurance exclusion applied, even though the case against the Lakers was dismissed finding no such invasion of privacy.  The California Court held that a TCPA suit is by definition a case based on invasion of privacy, regardless of the type of damages sought.

Since invasion of privacy is a common exclusion in insurance contracts, entities at risk of a TCPA case should carefully review their insurance policies to ensure that they are covered for defense costs in those cases. Any insurance contract should note that any exception for invasion of privacy does not apply for TCPA cases or specifically note that TCPA cases are covered regardless of other exemptions in the contract.

Los Angeles Lakers Inc. v. Federal Insurance Co., CV 14-7743 DMG, in the United States District Court for the Central District of California.  The Text of the Opinion May be Found HERE.