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State S.C. Gives ‘Iffy’ Response to Ninth Circuit Question
Says Policy Issued to Yahoo! Covering Violations of Federal Telephone Privacy Act Applies to Text Messages That Were Unsolicited, Not Disclosed to Third Parties, but Only If This Met Insured’s Reasonable Expectations
By a MetNews Staff Writer
The California Supreme Court declared yesterday that an insurance policy providing coverage for invasions of privacy might extend to class actions in state and federal courts against the insured, Yahoo! Inc., but only if such coverage corresponds to the insured’s reasonable expectations.
Yahoo! in seeking to have its insurer, National Union Fire Insurance Company of Pittsburgh, PA, held liable for costs of its defense in lawsuits based on alleged transgressions of the plaintiffs’ “right-of-seclusion” by spewing unsolicited text messages, assuredly in violation of the Telephone Consumer Protection Act of 1991 (“TCPA”).
Justice Martin J. Jenkins wrote for a unanimous court in providing a “maybe” response to a question certified to it by the Ninth U.S. Circuit Court of Appeals. As rephrased by the state high court, the question is:
“Does a commercial general liability insurance policy that provides coverage for personal injury, defined as injury arising out of oral or written publication, in any manner, of material that violates a person’s right of privacy, and that has been modified by endorsement with regard to advertising injuries, trigger the insurer’s duty to defend the insured against a claim that the insured violated the Telephone Consumer Protection Act of 1991 (47 U.S.C. § 227) by sending unsolicited text message advertisements that did not reveal any private information?”
Modification by Endorsement
National Union’s standard “personal and advertising injury” policy excluded coverage for TCPA violations. The modification alluded to in the question, “Endorsement No. 1,” removed the exclusion for such violations, and also excised coverage for advertising injuries.
It maintained the definition of “personal injury” as including “injuries arising from “[o]ral or written publication, in any manner, of material that violates a person’s right of privacy.”
Jenkins observed:
“Therefore, although Endorsement No. 1 removed coverage for advertising injuries, coverage for injuries to privacy remained.”
It withheld coverage for an injury from “[o]ral or written publication, in any manner, of material in your ‘advertisement’ that violates a person’s right of privacy.”
Magistrate Judge’s Ruling
U.S. Magistrate Judge Nathanael M. Cousins on June 2, 2017, granted National Union’s motion to dismiss the action, but granted leave to amend. Yahoo! stood on its complaint and Cousins on June 29, 2017, ordered entry of judgment in favor of National Union.
Cousins said that person who wants to be spared unwanted solicitations “asserts a claim to the privacy right of seclusion” while language similar to that in the policy in issue has “not been construed” by California courts to “cover alleged violations of seclusion privacy.”
What is covered, he said, is the right to “secrecy,” reasoning:
“Here, Yahoo made the text messages known to the recipients, but did not make the content of the text messages known to third parties. It is the content of the material that violates a person’s right to privacy when that material is made known.”
Spotlighting the words “oral or written publication,” the magistrate judge said:
“Here, the information was never published because the content was never made known to third parties….Therefore, the manner of publication is not at issue because there was no publication in the first place.”
Yahoo!’s Argument
In its Ninth Circuit brief, Yahoo! said:
“This appeal asks this Court to decide whether the National Union Policies, which provide coverage for conduct-based ‘personal injury’ offenses, separate and apart from content-based ‘advertising injury’ offenses, trigger National Union’s duty to defend Yahoo against claims that the insured violated the TCPA by sending unsolicited text messages that did not reveal any private information.
“Yahoo was denied the benefit of the personal injury coverage when the district court dismissed Yahoo’s complaint by interpreting the policy’s personal injury coverage based on the publication of material that violates a ‘person’s right to privacy’ to include only intrusions on a person’s right to secrecy, and not to include invasions of the right to seclusion.”
Jenkins declared that the provision of the policy in question—“[o]ral or written publication, in any manner, of material that violates a person’s right of privacy”—is ambiguous. The phrase “that violates an individual’s right of privacy,” he said, could relate to “oral or written publication,” as Cousins ruled, or could relate, more broadly, to “material.”
He wrote:
“[W]e agree with Yahoo! that the coverage provision is ambiguous and that the standard rules of contract interpretation do not resolve the ambiguity. Because the provision is ambiguous, we conclude that it must be interpreted in a way that fulfills Yahoo!’s objectively reasonable expectations, which must be determined in further litigation. Finally, if the foregoing procedures do not resolve the ambiguity, then we resort to the rule that ambiguities are to be resolved against the drafter, and here the insurer is considered to be the drafter of the specific coverage language whose meaning is in dispute.”
He noted:
“National Union asks us to apply the advertising injury exclusion of the policy to conclude that the policy does not cover Yahoo!’s potential TCPA liability in the underlying lawsuits. In the proceedings up to this point, however, National Union has not litigated the case based on the advertising injury exclusion, and the record before us does not indicate whether the text messages at issue here were advertisements as that term is defined in the policy. Accordingly, we express no view on the question.”
The case is Yahoo Inc. v. National Union Fire Insurance Company of Pittsburgh, PA, 2022 S.O.S. 5691.
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