An appeals court provided guidance on whether a Commercial General Liability policy obligated an insurer to defend against a claim involving the Telephone Consumer Protection Act (TCPA). Park University Enterprises (Park) was sued by J.C.Hauling. Hauling sued on behalf of a class of claimants who complained about receiving unsolicited faxes from Park. Park asked its CGL insurer, American Casualty Company (American) to defend against the lawsuit, but the insurer denied the request. Park and American filed motions asking a court to rule on the coverage issue. A court found in favor of Park, stating that it was owed a legal defense, and American appealed.

American claimed that its denial, based on two points, was justified. The insurer argued that the incident that violated the TCPA was ineligible for coverage because Park's action was not an occurrence and that the fax transmission was not an invasion of privacy. Specifically, the insurer stated that Park intentionally sent their advertising via a fax; so the intentional act is excluded. Further, the party that received the fax did not have its rights to privacy invaded because receiving the fax did not involve revealing a secret via the act of publishing information. In the latter case, the insurer argued that the act did not qualify for coverage under the CGL's advertising injury provision.

The appeals court focused its attention on the CGL's relevant policy language as well as on several cases cited by American in support of its position. In addressing the eligibility of the act as an occurrence, the court held the opinion that Park's sending the faxes was deliberate, but that intentional acts are based upon the perception of the party committing the act. The court record revealed that Park had sent fax advertisements to an employee of Hauling. That employee had attended a seminar offered by Park and, afterwards, provided Park with her fax number. Park argued that it believed the information it sent was welcome since they were voluntarily provided with the fax number from a customer. The court held that, under this circumstance, sending the fax qualified as an accidental occurrence since Park, while intending to send the fax, did not intend to cause harm to the fax recipient.

The next item evaluated by the court was whether sending the fax qualified under the CGL as an advertising injury. The policy wording stated that it would respond to claims involving invasion of privacy. The insurer argued that sending the fax did not invade anyone's privacy because it was not a publication of private information. The court interpreted the act as involving a violation of the recipient's right of seclusion, i.e., the right to be left alone. Therefore, the receipt of a fax it claimed to have been sent in violation of TCPA could be interpreted as violating a right to privacy. In this instance, the court held that American's position on the privacy issue did not conform with the policyholder's expectations. If it meant to use a narrower definition of "invasion of privacy", it was in the position to define the term in the policy. The appeals court upheld the lower court's decision in favor of Park. The insurer is obligated to provide a legal defense of Park against Hauling's class action claim under the TCPA.

Park University Enterprises, Inc., Plaintiff-Appellant, v. American Casualty Company of Reading PA, Defendant-Appellant. U.S. Court of Appeals, 10th Circuit. No 04-3197. Filed March 27, 2006. Affirmed. http://www.kscourts.org/ca10/cases/2206/03/04-3197.htm [downloaded 03/31/06]