This week in Horn v. Liberty Insurance Underwriters, Inc., 2019 U.S. Dist. LEXIS 90194 (S.D. Fla. May 30, 2019), the Florida district court held that an invasion of privacy exclusion under a claims-made policy prohibited coverage for an underlying Telephone Consumer Protection Act (TCPA) lawsuit. The decision is of interest because of the court’s reasoning, and as it may foreshadow the direction of coverage litigation as more and more data privacy (as opposed to data security) laws and regulations are passed and enforced.
The facts of Horn are straightforward. The insured, iCAN Holdings, described as a “national direct response marketer and seller of insurance products,” was sued in an underlying TCPA class action for allegedly sending unsolicited text messages. iCAN was insured under a “Private Advantage Insurance Policy,” which provided coverage for loss the insured becomes legally obligated to pay “by reason of any Claim first made against the Company during the Policy Period … for any Wrongful Acts by the Company ….” Horn, 2019 U.S. Dist. LEXIS 90194, at *2-3, 7. After the insurer denied coverage, the insured executed a $60 million consent settlement and assigned its rights to the underlying plaintiffs to recover the settlement amount from the insurer. Id. at *3. Coverage litigation ensued.
The insurer denied coverage under an “Invasion of Privacy” exclusion, which prohibited coverage for “Loss on account of any Claim made against the Company … based upon, arising out of, or attributable to any actual or alleged … invasion of privacy[.]” Id. at *7. The insurer argued that because the policy defined “Claim” as a “civil proceeding,” and because an underlying class action alleged TCPA violations which caused harm from an invasion of privacy, the lawsuit “arose out of an invasion of privacy, thereby implicating the exclusion. Id. at *9. The plaintiffs, on the other hand, contended that the exclusion did not apply because the lawsuit had allegations in addition to invasion of privacy that fell outside such an exclusion. Id. The plaintiffs also contended that the exclusion did not apply because they did not have to prove invasion of privacy to prevail because invasion of privacy “is not an element of the TCPA cause of action.” Id.
The federal court agreed with the insurer, first accepting the premise that although invasion of privacy is not an element for a TCPA claim, “a violation of the TCPA may in some circumstances be considered an invasion of privacy for the purposes of analyzing coverage in an insurance policy[.]” Id. at *10 (emphasis in original). The court noted that the underlying complaint itself alleged “that the class action plaintiffs’ privacy was invaded by the violative texts.” Id. at *16. The court also looked to recent decisions by other courts. The court noted the Florida Supreme Court’s acknowledgment in Penzer v. Transportation Ins. Co., 29 So.3d 1000, 1006 (Fla. 2010), that for TCPA litigation, “the source of the right of privacy is the TCPA, which provides the privacy right to seclusion.” Id. at *10-11. Similarly, the Ninth...
