Savvy business leaders know that insurance policies are often slippery. Although a valuable form of protection, a single provision can make the difference between full coverage and being left in the dust. In a recent example, a consumer accused a health insurance broker of sending unsolicited text messages without their consent in violation of the Telephone Consumer Protection Act (TCPA).
When faced with the evidence the business chose to settle the claim, agreeing to liability for more than $60 million in damages. Although likely a frustrating situation, the leaders of the group probably thought hey, this is why we have insurance. Unfortunately, their insurance provider did not agree. Instead of agreeing to pay the claim, the insurance provider, Liberty Mutual Group, argued that the settlement fell outside of provided coverage. They stated the TCPA settlement fell within a privacy exclusion within the policy. As a result, they said they did not have to pay the claim.
Upon review of the policy, a three-judge appeals court panel agreed with the insurance provider. They stated the policy has a broad exclusion for all civil proceedings that raise out of an invasion of privacy.
The dissent argues that this reasoning is a stretch, noting the court may “at times colloquially characterize” the robotexts as an invasion of privacy but that they did not rise to the definition of a common-law tort invasion of privacy.
The holding will likely send the liability for the settlement back to the business. The court could then go after the business’ assets to help pay for the damages.
The case provides an example of the steep cost of a failure to comply with the TCPA and highlights the need for regular internal audits to find and fix any problems before they rise to the level of a multi-million dollar lawsuit.