Skip to Content



Two Courts Address Coverage for TCPA Damages Under CGL Policy With Opposite Results

Blogs, Insurance Coverage

The United States Court of Appeals for the Third Circuit Court and the Illinois Court of Appeals recently addressed and reached different conclusions as to whether a commercial general liability (“CGL”) policy provides coverage for violations of the Telephone Consumer Protection Act (“TCPA”). Nationwide Mutual Insurance Company v. David Randall Association, Civil Action No. 13-1515 (3d Cir. 2014); Standard Mutual Insurance Co. v. Lay, No. 4-11-0527, (Il. App. 4th Dist. 2014). 

Specifically, in Nationwide Mutual Insurance Company v. David Randall Association, the Third Circuit held that the subject CGL policy did not provide coverage for violations of the TCPA. In the underlying suit, City Select Auto Sales, Inc. (“CSAS”) filed a class action against David Randall Associates (“Randall”) and its director, Raymond H. Miley (“Miley”) (collectively “Insureds”) alleging they had violated the TCPA. The complaint alleged Miley authorized and participated in a scheme to broadcast faxes, and Randall knew or should have known that the faxes were an advertisement. Nationwide Mutual Insurance Company (“Nationwide”), Randall’s insurer, denied the Insureds’ claim for coverage and filed a declaratory judgment action. The CGL policy issued by Nationwide provided coverage for “bodily injury” and “property damage,” but only if such damage was caused by an “occurrence.” An “occurrence” was defined as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” “‘Bodily injury’ or ‘property damage’ expected or intended from the standpoint of the insured” was excluded from coverage.

The District Court granted Nationwide’s motion for summary judgment finding that the transmission of unsolicited faxes was intentional and therefore not covered under the policy. The Insureds appealed. The Third Circuit observed that the case was virtually indistinguishable from its prior decision in Melrose Hotel Co. v. St. Paul Fire and Marine Insurance Company, 432 F. Supp. 2d 488 (E.D. Pa. 2006), aff’d, 503 F.3d 339 (3d Cir. 2007) and held that the underlying complaint contained no factual allegations that Randall acted negligently. Despite language in the Complaint that Randall “knew or should have known” of the TCPA violations, the complaint’s “allegations of a sophisticated scheme, alongside the inherently intentional nature of sending a fax advertisement were squarely outside the Policy’s coverage for an ‘accident’ and within the [p]olicy’s exclusion for coverage which is ‘expected or intended.’”

On the other hand, the Illinois Court of Appeals reached the opposite conclusion. Specifically, in Standard Mutual Insurance Co. v. Lay the court found that the insurer was obligated to pay a $1.7 million settlement in a TCPA class action lawsuit. Standard Mutual Insurance Co. v. Lay, No. 4-11-0527, (Il. App. 4th Dist. 2014). The underlying claims arose when Lay Real Estate Agency (“Lay”) sent out a blast fax advertisement to Locklear Electric (“Locklear”) through a fax broadcaster. Lay tendered the claim to its insurer, Standard Mutual Insurance Company (“Standard”). Standard undertook the defense under a reservation of rights and filed a declaratory judgment action to determine whether it was obligated to cover the claim under Lay’s policy. Through its own counsel, Lay settled with Locklear for $1,739,000. In return, Locklear agreed to not to execute on any of Lay’s property or assets, other than its insurance policies with Standard. Lay then assigned its rights against Standard to Locklear.

The trial court held that Standard had no duty to indemnify Lay was not obligated to pay the settlement. The Court of Appeals affirmed, finding that the statutory damages of $500 per occurrence provided under the TCPA were punitive damages and therefore uninsurable under Illinois law. In 2013, the Illinois Supreme Court disagreed and reversed. It found that TCPA damages are not punitive in nature and therefore are insurable under Illinois law. The Court then remanded the case the appellate court for consideration of Standard’s remaining arguments.

On remand, Standard asserted that the “personal and advertising injury” provision of the policy did not cover the allegations in the complaint, and even if coverage was triggered, the intentional acts exclusion applied. The Court of Appeals rejected Standard’s argument finding that allegations of advertising injury due to an invasion of privacy were covered under the policy’s “personal and advertising provision” which provided coverage for any “oral or written publication, in any manner, of material that violates a person’s right of privacy.” In so holding, the Court of Appeals noted that the same claims and policy language were interpreted previously by the Illinois Supreme Court in Valley Forge Ins. Co. v. Swiderski Electronics, Inc., 223 Ill. 2d 352 (2006) and that allegations of advertising injury due to invasion of privacy are covered where the policy’s definition of privacy includes the right to seclusion. The Court of Appeals went on to hold that the intentional acts exclusion did not bar coverage because the relevant issue “was not that Lay intended to send the faxes, but that Lay thought it had authorization to do so and therefore did not intend to injure anyone.”

 For more information on Nationwide Mutual Insurance Company v. David Randall Association click here

For more information on Standard Mutual Insurance Co. v. Lay click here