Eleventh Circuit: Insurer May Have to Cover Fax TCPA Liability

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January 5, 2017

fax-tcpaLast Thursday, the Eleventh Circuit Court of Appeals vacated a Georgia federal district court’s Telephone Consumer Protection Act (“TCPA”) ruling, finding that global online manufacturing marketplace MFG.com (“MFG”) satisfied its insurance policy’s notice requirement in connection with multiple fax TCPA lawsuits.

How can marketers minimize their risk of TCPA liability?

Insurance Policy and Fax TCPA Lawsuits

From 2003­ to 2009, MFG purchased general liability insurance from St. Paul Fire and Marine Insurance Co. (“St. Paul”).  Their written agreement required MFG to provide St. Paul with prompt notice of any incident that may be covered under the policy, along with copies of all related legal demands and documents.

In 2008, G.M. Sign, Inc. (“G.M. Sign”) filed a putative TCPA class action lawsuit against MFG based on an unsolicited fax advertisement allegedly sent to G.M. Sign by MFG.  MFG notified St. Paul of the 2008 fax TCPA lawsuit, but the insurance claim was denied after St. Paul concluded that the TCPA claim fell outside the scope of MFG’s general liability insurance policy.

MFG proceeded to defend itself against G.M. Sign’s TCPA claims until the suit was voluntarily dismissed without prejudice in 2009.  The very next day, G.M. Sign asserted the same claims against MFG on behalf of the same class of plaintiffs in another class-action fax TCPA complaint.  MFG did not notify St. Paul of the 2009 complaint.

MFG and G.M. Sign ultimately settled their dispute.  Under the terms of the settlement agreement, MFG was responsible for paying $460,000 to the class members, with the remainder to be satisfied from the proceeds (if any) of MFG’s insurance policy from St. Paul, which MFG assigned to the class.

Question of Insurance Coverage

Subsequently, G.M. Sign sued St. Paul on behalf of the class, claiming that the insurer owed MFG coverage under the policies for the settled claims, as well as damages for bad-faith refusal to defend and settle within the policy’s limits.

St. Paul asserted that MFG failed to satisfy the policy’s notice requirement (a condition precedent to coverage) when it did not notify St. Paul of G.M. Sign’s 2009 fax TCPA lawsuit.  The U.S. District Court for the Northern District of Georgia ultimately agreed with St. Paul, granting St. Paul’s motion for summary judgment and dismissing the case.  G.M. Sign appealed the decision to the Eleventh Circuit.

On December 29, 2016, the Eleventh Circuit vacated the district court’s judgment.  After comparing the two fax TCPA lawsuits, the Court found that the claims were identical and, as such, MFG had no obligation to provide St. Paul with notice of the 2009 suit in order to qualify for coverage.  The Court remanded the case to the district court for further proceedings, in part because St. Paul has maintained that MFG’s liability for alleged fax TCPA violations are not covered under MFG’s general liability insurance policy.

Protect Yourself from TCPA Liability

As the above-referenced case illustrates, fax marketers, text message marketers and telemarketers who fail to comply with the TCPA and its implementing regulations are at risk of substantial legal and financial liability.  Businesses served with a complaint alleging TCPA violations should immediately contact experienced telemarketing counsel and submit a claim with their insurer (even if the insurer may deny coverage).

If you are interested in learning more about this topic, or have been served with legal process in connection with your marketing practices, please e-mail us at info@kleinmoynihan.com or call us at (212) 246-0900.

The material contained herein is provided for informational purposes only and is not legal advice, nor is it a substitute for obtaining legal advice from an attorney. Each situation is unique, and you should not act or rely on any information contained herein without seeking the advice of an experienced attorney.

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