Current Trends In Insurance Coverage For Claims Based On TCPA Liability

The Telephone Consumer Protection Act ("TCPA"), 47 U.S.C. § 227, et seq., restricts certain forms of telemarketing and limits in many instances the use of automatic dialing systems, prerecorded voice messages, SMS text messages, and faxes. The TCPA provides consumers with a private right of action that enables them to recover up to $500 for a single violation, and up to $1,500 for each willful violation, of the TCPA. Because TCPA lawsuits are often brought as class actions and can involve thousands of alleged individual violations, purported damages can pile up very quickly. Not surprisingly, the legal bills incurred by companies defending against TCPA litigation can be also be very significant.

As with any sizable and unexpected potential liability, companies frequently turn to their insurance policies to seek coverage for their defense costs and their potential liability under the TCPA. Claims are most frequently asserted under commercial general liability ("CGL"), Directors' and Officers' ("D&O"), and professional liability/errors and omissions (E&O) insurance policies.

With respect to CGL insurance policies, policyholders typically argue that the "advertising injury" provisions of their insurance policies, which often cover any "oral or written publication that violates a person's right to privacy." There are strong arguments that this wording includes claims alleging violations of the TCPA. This is because most TCPA claims allege that the policyholder company violated the plaintiffs' right to seclusion, which is one form of the right to privacy. Because CGL policies do not, however, typically include a clear definition of the "right to privacy," whether alleged TCPA violation are covered under the privacy wording may be left to judicial interpretation.

D&O and E&O policies also may cover TCPA liability under provisions providing coverage for claims arising out of a "wrongful act." While a "wrongful act" in policies sold to publicly-traded companies is often limited to securities suits, a "wrongful act" for privately held companies may include a wide variety of commercial liability, including TCPA claims. In addition, D&O policies cover individual directors and officers, to the extent that they are not indemnified by the company, and also cover the company for the costs of indemnifying its directors and officers. Thus, where a suit alleging violations of the TCPA names an individualdirector orofficer (terms which generally are broadly...