Metropolitan News-Enterprise


Thursday, January 17, 2019


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Ninth Circuit Asks S.C. for Guidance on Insurance Coverage

Certifies Question in Yahoo’s Action Against Insurer as to Whether Policy Pertaining To Privacy Breaches Creates Duty to Defend in Actions Alleging Spamming


By a MetNews Staff Writer


The Ninth U.S. Circuit Court of Appeals yesterday asked the California Supreme Court to tell it whether, under California law, a policy insuring against liability for privacy violations encompasses actions over nuisance spamming.

The question that was certified is:

“Does a commercial liability policy that covers ‘personal injury,’ defined as ‘injury…arising out of...[o]ral or written publication...of material that violates a person’s right of privacy,’ trigger the insurer’s duty to defend the insured against a claim that the insured violated the Telephone Consumer Protection Act by sending unsolicited text message advertisements that did not reveal any private information?”

The plaintiff, Internet media giant Yahoo!, Inc., contends in its action against National Union Fire Insurance Co. that the defendant is obliged to defend it in in five putative class-action suits over its mass distribution of unsolicited text messages, while the insurer insists that it is only required to defend where personal information is bared.

District Court Judge Nathanael Cousins of the Northern District of California on June 23, 2016 ordered dismissal of  Yahoo!’s action with leave to amend; Yahoo! stood on its complaint, and judgment was entered for the insurer.

Appeals Court Cases

Yesterday’s order certifying the question to the state high court—signed by Circuit Judges  Milan D. Smith Jr. and Jacqueline H. Nguyen and Judge Jane A. Restani of the United States Court of International Trade, sitting by designation—tells of an inability to determine how the California Supreme Court would determine the question notwithstanding two Court of Appeal decisions finding non-coverage.

“The California Supreme Court sometimes looks to decisions in other jurisdictions for their persuasive value,” the order notes, pointing out that the two decisions have been criticized in opinions rendered in other states.

The two decisions—both from this district—are ACS Sys., Inc. v. St. Paul Fire & Marine Ins., decided in 2007 by Div. Three, and State Farm Gen. Ins. v. JT’s Frames, Inc., determined by Div. Four in 2010.

Kitching’s View

Writing for Div. Three, then-Justice Patti S. Kitching (now retired) said:

“Because we hold that the advertising injury and property damage provisions of the insurance policy did not provide coverage for liability for violations of the TCPA or for invasion of privacy caused by the sending of unsolicited faxed advertisements, we conclude that no potential for coverage existed and no duty to defend arose.”

Div. Four, in an opinion by then-Justice (now Presiding Justice) Nora Manella, said a policy did not cover the transmission of unsolicited faxed advertisements because the material sent did not contain “confidential information” and did not violate a “victim’s right to secrecy.”

Particular Language

In the order of certification, the panel expressed particular interest in the California Supreme Court’s construction of the policy language providing coverage for “oral or written publication of material that violates a person’s right of privacy.” It says:

JT’s Frames relied principally on the ‘last antecedent’ canon of construction, which provides that ‘qualifying words, phrases and clauses are to be applied to the words or phrases immediately preceding and are not to be construed as extending to or including others more remote.’ ”

It recites that the court in JT’s Frames concluded that “the phrase ‘that violates a person’s right to privacy’ must be construed to modify the word ‘material,’ ”—not the phrase “publication of material.”

The order says:

“We would greatly benefit from knowing whether the California Supreme Court agrees with JT’s Frames application of the last antecedent rule and to what extent its interpretation of the relevant policy language depends on other contextual factors—in particular, the distinction between personal and advertising injury.”


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