On July 10, the Federal Communications Commission (FCC) released a Declaratory Ruling and Order which greatly expands the reach of the Telephone Consumer Protection Act of 1991 (TCPA). The Declaratory Ruling and Order was adopted at the June 18, 2015 Open Commission Meeting, and is the FCC’s response to the flood of petitions it received after making its TCPA rules more stringent in 2012. The Order—which addresses 21 separate requests for FCC action—recognizes limited exemptions to the current rules, but for the most part, increases the potential for liability under the TCPA. As a result, if it stands up to what are sure to be challenges in the courts, the Order is likely to lead to increased TCPA litigation and enforcement activity. Two dissenting commissioners expressed strong disagreement with the Order, with one noting that the new Order will make “abuse of the TCPA much, much easier[,] [a]nd the primary beneficiaries will be trial lawyers, not the American public.”
Generally speaking, the TCPA bars a number of practices involving telephone and facsimile communications to individuals and businesses. Among other things, and subject to various exemptions as set forth by the FCC, the TCPA prohibits:
- Making any call (which has been interpreted to include text messages) using an automatic telephone dialing system or an artificial prerecorded voice to any telephone number assigned to a paging service, cellular telephone service, or other service for which the called party is charged for the call. See 47 U.S.C. § 227(b)(1)(A)(iii).
- Making any telephone call to a residential telephone line using an artificial or prerecorded voice without the prior express consent of the party. See 47 U.S.C. § 227(b)(1)(B).
- Sending unsolicited facsimile advertisements. See 47 U.S.C. § 227(b)(1)(C).
The TCPA contains a private right of action, which permits plaintiffs to recover their actual losses or $500 per violation (or trebled for willful knowing violations). See 47 U.S.C. § 227(b)(3). The $500 per call damages have been held to be mandatory—and thus courts have awarded astronomical awards even when there is no real harm to the plaintiffs. As a result of the potential exposure, large eight-figure settlements have been commonplace and widely reported in the media.
July 10 Declaratory Ruling and Order
In broad terms, the recent Declaratory Ruling and Order makes sweeping changes and in some instances reaffirms the FCC’s position on certain provisions of the TCPA. Among other things, the FCC:
- Broadly interprets the term “autodialer” and reiterates that “dialing equipment [that] generally has the capacity to store or produce, and dial random or sequential numbers” is an autodialer under the TCPA.
- Holds that application providers that play a minimal role in sending text messages are not always subject to TCPA liability as the maker of a call, but can be under certain factual scenarios.
- States that while prior express consent may be given through an intermediary, it cannot be assumed.
- Affirms a consumer’s right to revoke consent to calls at any time and through any reasonable means.
- Finds that a “called party” means the current subscriber or non-subscriber customary user, not the intended recipient, meaning that a caller can be liable under the TCPA if it calls a number for which it had consent from the previous subscriber but which was since reassigned.
- Reiterates that text messages are “calls” for purposes of the TCPA.
- Holds that internet-to-phone text messages are sent using an “automatic telephone dialing system” and therefore require consent.
(For a more extensive discussion of the recent Order, please see FCC Releases Long-Awaited TCPA Declaratory Ruling and Order).
Implications for Insurers
The recent Order has the potential to greatly expand the scope of the TCPA, which in turn could cause increased litigation and an increased number of claims under insurance policies.
Over the past 15 or so years, insureds have sought coverage under a wide range of types of insurance policies.
The results have been mixed under Commercial General Liability policies. See Court Finds Insurance Coverage for TCPA Telemarketing Claims. While insurers have experienced some success in this area, they have been increasingly successful as many more recent policies contain exclusions for alleged TCPA violations, with some even mentioning the TCPA by name.
By contrast, insureds have had very little success under specialty lines policies, including D&O, E&O, and cyber coverages. See, e.g., Los Angeles Lakers, Inc. v. Federal Ins. Co., No. 2:14-cv-07743-DMG-SH, 2015 WL 2088865 (C.D. Cal. Apr. 17, 2015) (D&O); LAC Basketball Club v. Fed. Ins. Co., No. 2:14-cv-001113-FAF-FFM, 2014 WL 1623704 (C.D. Cal. Feb. 14, 2014) (D&O); Resource Bank v. Progressive Cas. Ins. Co., 503 F. Supp. 2d 789 (E.D. Va. 2007) (D&O); Doctors Direct Ins., Inc. v. Beaute’e’mergente, LLC, 2015 IL App (1st) 142919-U (Ill. App. Ct. June 22, 2015) (cyber); BCS Ins. Co. v. Big Thyme Enters., Inc., No. 3:12-CV-933, 2013 WL 594858 (D.S.C. Feb. 14, 2013) (E&O); Westport Ins. Corp. v. Jackson Nat’l Life Ins. Co., 900 N.E.2d 377 (Ill. App. Ct. 2008) (E&O). These cases and others reaffirm that claims alleging TCPA violations are generally not covered by these policies.
While insurers may have strong coverage defenses for claims alleging TCPA violations, TCPA litigation is still active, and the recent Order suggests that the litigation is unlikely to let up any time soon. And, given the stakes, at least some insureds are likely to continue pursue coverage under a wide range of insurance policies.