The U.S. Court of Appeals for the First Circuit recently held that a commercial insurance policy, covering injury caused by advertising, did not provide coverage for alleged violations of the Telephone Consumer Protection Act ("TCPA"), 47 U.S.C. § 227(b)(1)(C). A copy of the opinion is attached.
Plaintiff Cynosure, Inc. ("Cynosure") brought a declaratory judgment action to determine coverage liabilities under an insurance policy insuring against liability for injury caused by advertising. The underlying civil action involved allegations that Cynosure sent commercial fax messages "without consent from the recipients" in violation of the TCPA. Cynosure's insurance policy provided coverage for "making known to any person or organization covered material that violates a person's right of privacy." Cynosure's insurer ("Insurer") denied that the provision extended to liability under the TCPA, arguing that the policy only applied "where an insured makes known to others covered material that violates some other person's right of privacy," but not where the recipient of the fax suffered the privacy injury, as in the underlying civil action.
Thus, the issue before the Court was whether "policies insuring against liability for violating privacy by advertising activity mean privacy understood as repose undisturbed by commercial intrusion (and thus liability for violating the [TCPA]), or privacy as freedom from disclosure to a third-party recipient of information" that the third-party does not want disclosed.
The lower court found the relevant provision ambiguous, followed the common rule that ambiguity is resolved in favor of coverage, and therefore held in favor of Cynosure. The First Circuit reversed, holding that the relevant policy provisions referred unambiguously to "disclosure" of private third-party information, and not to "intrusion" as to the recipient of the communication, and therefore the policy did not cover liability for violating the Act.
The Court first distinguished the case relied upon by the district court, Terra Nova Ins. Co. v. Fray-Witzer, 449 Mass. 406 (2007), and determined that the issue before it was one of first impression to be decided by Massachusetts state principles of insurance contract interpretation.
The Court interpreted the policy "according to the fair and reasonable meaning of the words" of the policy. In this case, the policy "distinguish[ed] 'person' and 'organization' and thus provid[ed] that a covered advertising injury occurs when an insured makes known to an 'organization' some material that violates a 'person's' right of privacy…" The Court held that, "[s]ince a mere intrusion into the recipient's repose does not violate any right of a non-recipient … the communication to the recipient violates the non-recipient's right of privacy only if it is a communication about the non-recipient" which that person reasonably does not want disclosed.
The Court further reasoned that its interpretation was "consistent with the straightforward meaning of related provisions in the Insurer's policies covering liability for other advertising offenses," such as libel and slander, where "the injury turns on the content of the material communicated to a third party." In addition, the Court's interpretation of the policy was "congruent with the accepted definition of the verb phrase 'make known,' which other courts have read as commonly meaning 'telling, sharing or otherwise divulging.'"
The Court also reasoned that, unlike the use of "publication" in other insurance contract provisions, "there is no apparent ambiguity in the 'making known' provision considered here, describing coverage of liability for making known to one person or organization something about a third person." Finally, the Court reasoned that "the content of the material communicated (revealing something about a third party) is necessary for a covered violation of a right of privacy" because the modifying phrase "that violates a person's right to privacy" referred to "material," and not "making known" as Cynosure argued.
Accordingly, the Court determined that the "language in these 'making known' policies is not ambiguous," and that the advertising liability coverage applies only "where an insured makes known to others covered material that violates some other person's right of privacy," which is not a basis "for liability incurred by sending faxes in violation of § 227(b)(1)(C)" of the TCPA.
Ralph T. Wutscher
McGinnis Tessitore Wutscher LLP
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