Fax Blasting Covered Under A Commercial Liability Policy
The Illinois Supreme Court Holds That Fax Blasting May Be Potentially Covered Under A Commercial Liability Policy
In Valley Forge Ins. Co. v. Swiderski Electronics, Inc., 2006 WL 3491675 (Ill. 2006), the Illinois Supreme Court held that allegations against an insured for unsolicited faxes potentially fell within the insured’s commercial general liability “advertising injury” coverage as a “publication,” and “material that violates a person’s right of privacy.” The “right of privacy” in the “advertising injury” provision connoted both an interest in seclusion and an interest in the secrecy of personal information.
In Swiderski, Swiderski Electronics sent Rizzo, a private detective, and others a fax advertisement with sales information on various types of electronic equipment. This type of advertising still occurs with unsuspecting new businesses or those that simply do not realize that it may be illegal. In response to this advertising, Rizzo filed a class action suit alleging that, by faxing copies of the advertisement without first obtaining the recipients’ permission, Swiderski violated section 227 of the Telephone Consumer Protection Act (TCPA) (47 U.S.C. § 227 (2000)). The complaint sought damages, attorney fees, and injunctive relief on behalf of all individuals who received an unsolicited fax advertisement from Swiderski.
Swiderski tendered defense of the suit to its primary insurer, Valley Forge, and its excess insurer, Continental Casualty Corporation. The policies provided similar coverage. Under the Valley Forge policy, Valley Forge had a duty to defend Swiderski against any suit seeking damage caused by “personal and advertising injury.” Personal and advertising injury included injury that arose from “oral or written publication, in any manner, of material that violates a person’s right of privacy.”
Swiderski argued that the complaint alleged facts potentially within policy coverage so that the insurer had a duty to defend.
The essence of a TCPA fax-ad claim is that one party sends another an unsolicited fax advertisement. The receipt of an unsolicited fax advertisement implicates a person’s right of privacy insofar as it violates a person’s seclusion, and such a violation is one of the injuries that a TCPA fax-ad claim is intended to vindicate. The harm from unsolicited faxes involves protection of ‘privacy.’ The court found that the TCPA’s private right of action was meant to remedy and prevent the twin harms of damage to privacy and economic damage. The court found that it was clear that the TCPA aimed in part to protect privacy. With the TCPA, Congress took aim at the intrusive nature of unsolicited faxes.
The complaint implicitly alleged a violation of a privacy interest. Based on the plain, ordinary, and popular meaning of those words, the court believed that this type of injury fell potentially within the coverage of the “advertising injury” provision.
The policy did not define the terms “publication,” “material,” or “right of privacy.” The court found that the “right of privacy” connoted both an interest in seclusion and an interest in the secrecy of personal information. The policy language “material that violates a person’s right of privacy” could reasonably be understood to refer to material that violated a person’s seclusion. Unsolicited fax advertisements, the subject of a TCPA fax-ad claim, fall within this category.
By faxing advertisements, Swiderski engaged in the “written * * * publication” of the advertisements. The “material” that Swiderski allegedly published, advertisements, qualified as “material that violated a person’s right of privacy,” because, according to the complaint, the advertisements were sent without first obtaining the recipients’ permission, and therefore violated their privacy interest in seclusion. The language of the “advertising injury” provision was sufficiently broad to encompass the conduct alleged in the complaint.
The court noted that its conclusion was in agreement with the majority of federal courts of appeals that have considered “advertising injury” coverage for fax-ad claims. State courts remain incongruent in their holdings due to varying policy language and a mixed application of the law.
In this case, what may have seemed like an innocent advertising action, can cause significant downstream damage. Here, an insured was merely sending out a notice of a sale and some rental information. This generated a private cause of action on the part of each recipient. A class action suit followed, triggering coverage under a liability policy.
Most businesses are now aware of the TCPA and refrain from this activity. For those few remaining companies, as well as new start-up companies, a fax-ad campaign could lead to a series of suits and potential coverage under a liability policy.
