Mesa Laboratories v. Federal Insurance Co.

Last week, the Seventh Circuit reminded advertisers of the narrowing availability of insurance coverage for Telephone Consumer Protection Act (TCPA) claims.  In Mesa Laboratories v. Federal Insurance Co., the court rejected a fax marketer’s bid to make its insurer pay for its defense and settlement of an underlying unsolicited fax lawsuit.  This decision underscores the insurance industry’s recent trend of limiting TCPA coverage under general policy forms and requiring policyholders to seek out and purchase specific coverage for those types of claims.

At one time, insurance policies did not say whether they provided coverage for claims brought under the TCPA.  When the statute was passed in 1991, many policyholders were able to secure coverage for TCPA claims under the “personal and advertising injury” portions of their general liability insurance policies, which typically cover any “oral or written publication that violates a person’s right to privacy.”  With the explosion of TCPA lawsuits in recent years, however, insurers have looked to reduce their own exposure by adding exclusions to their policies that expressly bar coverage for TCPA claims.  At the same time, many carriers have started offering affirmative coverage for TCPA liability.  Policyholders usually must pay extra for this, however, and the coverage often comes with reduced sublimits of liability or other restrictions on coverage.

But even when a policy has an express TCPA exclusion, an insurer still might have to defend its insured in a lawsuit that asserts TCPA claims because of a general principle of insurance law recognized by courts around the country: if a lawsuit asserts multiple claims against an insured, and at least one of those claims is covered by the policy, the insurer must defend the entire lawsuit – even if the other claims are expressly excluded from coverage.  Thus, an insurer whose policy excludes TCPA claims might have to defend a TCPA lawsuit if the plaintiff also includes a false advertising or defamation claim, both of which are expressly covered.
Continue Reading Seventh Circuit Reminds Insurance Policyholders to Shop Carefully for TCPA Coverage