On August 23, the Ninth Circuit Court of Appeals affirmed a decision by Judge Dolly M. Gee of the United States District Court for the Central District of California holding that the Los Angeles Lakers were not entitled to insurance coverage under their D&O Policy for a class action alleging the team sent unsolicited text messages to fans in violation of the Telephone Consumer Protection Act (TCPA). Upholding the district court’s decision, the court concluded that the TCPA claims fell within the invasion of privacy exclusion in the Lakers’ D&O Policy, which excluded coverage for claims “based upon, arising from, or in consequence of libel, slander, oral or written publication of defamatory or disparaging materials, invasion of privacy…”
The underlying suit against the Lakers was brought by a fan who alleged he had received unwanted promotional text messages from a Lakers’ automated system after attending a game at the Staples Center. The class action suit alleged that the unsolicited messages violated the TCPA and cost the fan and other class members in text-message charges. The fan’s suit was dismissed after a court found that by sending an initial message to the team, the fan had consented to the promotional text messages.
The Lakers sought coverage for their defense expenses incurred in defending the fan’s suit under their D&O policy. The insurer denied coverage pursuant to the “invasion of privacy” language in the policy’s personal injury exclusion. Litigation ensued over coverage for the Lakers’ defense costs.
Agreeing with the insurer, Judge Gee granted the insurer’s motion to dismiss the Lakers’ suit, finding that the policy’s invasion of privacy exclusion precluded coverage for the suit because the allegations of TCPA violations were, at their heart, a claim for a privacy breach. In reaching this decision, Judge Gee relied on prior case law interpreting coverage provisions in commercial general liability policies to include coverage for TCPA Claims as “invasion of privacy” claims within the advertising injury coverage. The Lakers appealed.
In a split-panel 2 to 1 decision, the Ninth Circuit affirmed the district court’s judgment, reasoning that “the purpose of the TCPA is to protect privacy rights and privacy rights alone” such that the invasion of privacy exclusion properly precluded coverage. Finding that “a plaintiff asserts an invasion of privacy claim when he or she asserts a TCPA claim”, the Ninth Circuit court determined that the insurer had correctly identified the TCPA claims as claims for invasion of privacy, which were clearly excluded under the Policy.
The Ninth Circuit’s holding sets an important limitation on coverage for TCPA claims, which have been increasing in recent years, and clarifies the scope of the “invasion of privacy” language in a private company D&O policy’s personal injury exclusion. The case is Los Angeles Lakers Inc. v. Federal Insurance Co., United States Court of Appeals for the Ninth Circuit Case No. 15-55777. However, given the lack of consensus among the judges on the panel, the case could be a candidate for en banc review by the entire Ninth Circuit.