The United States District Court for the Central District of California has held that an invasion of privacy exclusion in a D&O policy barred coverage for a claim alleging violations of the Telephone Consumer Protection Act (TCPA). Los Angeles Lakers, Inc. v. Federal Ins. Co., No. 2:14-cv-07743-DMG-SH (C.D. Cal. Apr. 17, 2015).
The insured, a professional basketball organization, was sued for violations of the TCPA after it sent text messages to numerous individuals. The policyholder tendered the suit under its D&O policy, but the insurer denied coverage on the basis that the policy barred coverage for any claim “based upon, arising from, or in consequence of … invasion of privacy ….” After disputing the denial, the policyholder filed a coverage action against the insurer, arguing that the underlying suit alleged only economic injuries and did not seek damages for the violation of privacy interests.
Ruling on the insurer’s motion to dismiss, the court held that the invasion of privacy exclusion barred coverage for the underlying suit. First, the court noted that “violations of the TCPA are rooted in a violation of an individual’s privacy interests,” and it recognized that courts have “universal[ly] interpret[ed] TCPA claims as implicit invasion-of-privacy claims.” Based on that conclusion, and “because the [p]olicy specifically exclude[d] claims arising from invasions of privacy,” the court ruled that the exclusion applied. The court also noted that its conclusion was bolstered by the broad prefatory language of the exclusion. Finally, the court recognized that a number of other decisions, including LAC Basketball Club Inc. v. Federal Insurance Co., No. CV 14-00113 GAF FFMX, 2014 WL 1623704 (C.D. Cal. Feb. 14, 2014), and Resource Bank v. Progressive Casualty Insurance Co., 503 F. Supp. 2d 789, 797 (E.D. Va. 2007), had applied invasion of privacy exclusions in D&O policies for claims involving alleged TCPA violations.