On December 15, 2016, in The Travelers Indemnity Co. of Connecticut v. Max Margulis, et al., the U.S. District Court for the Eastern District of Missouri ruled that an insurer did not have a duty to defend its policyholder in a suit alleging a violation of the Telephone Consumer Protection Act (“TCPA”). Margulis is one of several cases addressing the scope of insurance coverage for TCPA violations to come out of the Eastern District of Missouri. Since automated dialing and other forms of targeted marketing are common business solicitation techniques, insurers and policyholders should pay careful attention to this case and the scope of coverage under their policies.
The underlying suit arose when the policyholder, Surrey Vacation Resorts, Inc., d/b/a Grand Crowne Resorts (“Surrey”) allegedly solicited Max Margulis using an automated telephone dialing system without his consent. Margulis filed suit against Surrey, alleging a violation of the TCPA, and Surrey sought a defense from Travelers, its commercial liability insurer. Travelers initially defended Surrey under a reservation of rights, but soon thereafter filed a declaratory judgment action asserting that coverage for the TCPA suit was excluded by the policies at issue.
In this regard, Travelers issued four commercial general liability policies to Surrey, and each contained an endorsement expressly excluding coverage for claims arising from “Unsolicited Communications.” The first three policies defined “Unsolicited Communications” as “any form of communication, including but not limited to … communications which are made or allegedly made in violation of the Telephone Consumer Protection Act … and/or local or state statutes that bar, prohibit or penalize such communications.” The fourth policy defined “Unsolicited Communications” as “any communication, in any form, that the recipient of such communication did not specifically request to receive.”
After examining the language in the policies and the allegations in the underlying complaint, the district court concluded that the TCPA is a “law that restrict or prohibits the sending, transmitting or distributing of ‘unsolicited communication[s]’.” As such, the court found that the policyholder’s alleged violation of the TCPA was excluded from coverage by the “Unsolicited Communications” endorsements appearing in all four policies. In doing so, the court noted that similar exclusions had previously been applied and enforced to exclude coverage for TCPA violations. As no coverage was available under any of the four policies, the court found that Travelers had no duty to defend Surrey in the underlying lawsuit.