During this busy holiday shopping season, retailers may end up facing litigation under the Telephone Consumer Protection Act (TCPA) for sending advertisements to consumers’ cell phones.  With large-scale litigation potentially at stake, retailers should review their insurance policies to determine whether their insurers are obligated to defend and pay TCPA defense costs and claims.  Beware, however, that insurers—faced with a growing number of claims—have begun to expressly exclude coverage for TCPA claims from their policies.

Telephone Consumer Protection Act

In an era when the vast majority of people have cell phones, retailers may be tempted to send voice messages or text advertisements to consumers’ cell phones to reach as many potential customers as possible during the retail industry’s crucial holiday shopping season.  Retailers  should be mindful that the TCPA was enacted by Congress to protect consumers from unwanted telephone calls and faxes.  Indeed, courts have consistently found that one of the objectives of the TCPA is to protect an individual’s privacy.  See, e.g., Valley Forge Ins. Co. v. Swiderski Electronics, Inc., 223 Ill.2d 352, 365 (2006).  Among other things, the TCPA prohibits autodialed and prerecorded voice and text messages sent to cell phones for the purpose of advertising or telemarketing unless the called party has previously given prior written consent.  Whether a retailer has obtained prior written consent is often the subject of litigation, and because voice and text messages may be sent to numerous individuals, a retailer may risk facing a class action lawsuit.  Additionally, the TCPA provides a right of action for actual monetary loss or $500 per violation and up to $1,500 for knowing or willful violations.  This means that claimed statutory damages can be substantial, especially for large advertising campaigns.  Of course, regardless of the outcome, a retailer may incur significant legal expenses defending itself against a TCPA class action.

Indeed, Domino’s Pizza currently is fighting a putative class action in a Florida federal court, alleging violations of the TCPA for continuing to send marketing texts to a consumer after the consumer opted out of receiving marketing texts.  This case comes on the heels of a reported settlement by McGreet Inc., the company that runs Domino’s text messaging campaign, of another TCPA class action for $16 million with the promise that it would stop sending unwanted text messages on behalf of its clients.  Twitter is also defending against a $5 million proposed class action in a California federal court for allegedly sending unsolicited text messages.

Insurance Concerns

The good news is that a company’s liability insurance may provide protection from TCPA claims.  The bad news is that in the wake of numerous TCPA claims, insurance companies have begun to push back and add TCPA exclusions to their policies.  Accordingly, a policyholder needs to carefully review its insurance if it is facing, or anticipates, a TCPA lawsuit to understand how the coverage applies and whether it may be able to “buy back” such coverage.

Commercial General Liability (CGL) Insurance

A policyholder may be able to obtain coverage under its traditional CGL insurance.  For example, Advertising and Personal Liability (Coverage B) under a typical CGL policy provides coverage for claims arising out of invasions of privacy.  Typical policy language includes coverage for “oral or written publication, in any manner, of material that violates a person’s right to privacy” (the “Publication Language”) or “making known to any person or organization covered material that violates a person’s right to privacy” (the “Making Known Language”).  Insurers usually argue that the TCPA protects against violations of the right to seclusion, while the CGL policy language covers only violations of the right of secrecy.  Many courts, however, have upheld coverage, finding that “right to privacy” includes a “right to seclusion.”  See, e.g., Valley Forge, 223 Ill.2d at 368 (holding that right to privacy in the Publication Language includes the right to seclusion).

In an effort to reduce their risk, many CGL insurers have changed their policies to exclude coverage relating to the TCPA.  Also, in 2013, the Insurance Services Office, Inc. (ISO) introduced an optional endorsement that deletes the CGL policy’s Publication Language.  However, a policyholder should not forego pursuing insurance coverage if it faces a lawsuit with multiple causes of action.  Even if the policy excludes coverage for TCPA claims, an insurer still may be required to provide a defense if even one of the causes of action is potentially covered under the CGL policy. 

Also, policyholders should check their umbrella liability policies.  Those policies may provide broader coverage than a primary CGL policy.  Although insurers also may rely on broader policy exclusions that do not expressly name the TCPA, a policyholder should reject such arguments, citing ambiguities which should be construed against the insurance company drafter.    

D&O Insurance

D&O policies may be implicated when a suit is brought against the directors and officers of a company (or against the company itself), alleging that they committed wrongful acts in their capacity as directors and officers (e.g., failed to implement procedures consistent with the TCPA).  Because D&O coverage typically does not contain an express TCPA exclusion, policyholders should give notice to D&O insurers of claims against directors and officers. 


    • If your policies exclude TCPA claims, check with your advisers to see if you can buy back TCPA coverage going forward.
    • Review all new policies as soon as they are received to confirm that they do not contain any errors or surprise exclusions.  Retain policy procurement records – they often are valuable evidence if you find yourself in a dispute with your insurer.
    • Retain all general liability policies, no matter how old.  Coverage under an “occurrence-based” policy never expires because coverage is activated, or “triggered,” by injury that took place during the policy period.  A policy from past years may be a critical asset.

Additional Information

For more information on TCPA, see our recent updates:

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