Insurer Obtains Declaratory Judgment On TCPA Coverage Claim, Favorably Applying Pennsylvania Law

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This week, the United States District Court for the Northern District of Ohio, in Hartford Fire Ins. Co. v. Flagstaff Industries, Corp., NO. 1:11 CV 1137, 2012 WL 1669845 (N.D.Ohio May 10, 2012), applied Pennsylvania law to an insurance coverage dispute involving claims under the Telephone Consumer Protection Act (“TCPA”) and concluded that no coverage existed for an invasion of privacy or property damage.

Hartford Fire Insurance Company and Hartford Casualty Insurance Company (collectively “Hartford”) were faced with claims for coverage arising out of it’s insured’s an alleged violation of the Telephone Consumer Protection Act (“TCPA”). Id. at *2. The insured, Flagstaff Industries, Corp. (“Flagstaff”), defaulted in a class action alleging a violation of the TCPA by way of Flagstaff’s unsolicited fax advertisements. Id. The resulting default judgment against Flagstaff was $1,070,000.00 and attorneys fee were $350,000. Id.

Following the default judgment, the class action claimants (“Claimants”) made a demand against Hartford for all portions of the default judgment. Id. The Claimants argued that Flagstaff’s unsolicited faxes were a publication that violated the Claimants’ “right to privacy” and that coverage existed under Hartford’s policy provisions pertaining to “advertising injury”. Id. The Claimants alternatively contended that the blast-faxes triggered coverage under the property damage provisions of Hartford’s policies.

At issue were two primary Commercial General Liability (“CGL”) policies, and an umbrella liability policy. The primary policies included an insuring agreement under coverage A that provided that Hartford will pay those sums that Flagstaff becomes legally obligated to pay “because of ‘property damage’ . . . caused by an ‘occurrence'” provided that the property damage occurs during the policy period.” Id. at *2. The Insuring Agreement under Coverage B in the primary policies provided that “Hartford will pay those sums that Flagstaff becomes legally obligated to pay as damages ‘because of ‘personal and advertising injury.’ ‘Personal and advertising injury’ is defined as injury arising out of one or more of certain enumerated offenses, including oral, written, or electronic ‘publication of material that violates a person’s right of privacy.'” Id. The court noted that Hartford’s Umbrella policies “contained substantially similar language as to the language in the insuring agreements in the Primary Policies.” Id.

After declining coverage, Hartford filed a declaratory judgment action. The United States District Court for the Northern District of Ohio concluded that the Claimants’ underlying action did not fall under Hartford’s “advertising injury” provisions:

Moreover, Hartford’s cases applying Pennsylvania law are persuasive to show that the TCPA claims at issue are not covered under Hartford’s policies. As Melrose, Advent, Brethren, and Express Productsall teach, TCPA claims that do not complain about the content of unsolicited fax transmissions do not fall within the meaning of advertising injury insurance coverage provisions affording coverage for injuries arising out of publications violating a person’s “right of privacy.”

* * *

The courts applying Pennsylvania law have held that such rights to “privacy” pertain only to one’s privacy interest in secrecy, not seclusion and do not cover TCPA claims unrelated to the content of the faxes.

Id. at *5.

The court also agreed with Hartford that the unsolicited faxes could not fall within any property damage because the blast faxes, as per Claimant’s underlying action, were not accidental:

. . . Hartford’s argument is persuasive that the TCPA claims do not constitute property damage caused by an accidental “occurrence” because the claimants repeatedly alleged in their complaint in the underlying action that Flagstaff’s conduct was willful and knowing (in order for the claimants to recover treble statutory damages under the TCPA). These allegations, which supported the judgment entered in the underlying action, foreclose a claim here that the faxes constitute property damage caused by an accidental occurrence.

Id. at *7. Accordingly, the court granted Hartford’s motion for judgment on the pleadings, defaulted Flagstaff for failure to appear, and issued a declaratory judgment that “Hartford’s policies do not provide coverage for the asserted TCPA claims.”