Ninth Circuit Applies Invasion of Privacy Exclusion to Bar Coverage for TCPA Claims under D&O Policy

The Court of Appeals for the Ninth Circuit, applying California law, has held that an invasion of privacy exclusion in a D&O policy barred coverage for a claim alleging violations of the Telephone Consumer Protection Act (TCPA).  Los Angeles Lakers, Inc. v. Federal Ins. Co., 2017 WL 3613340 (9th Cir. Aug. 23, 2017).

The insured, a professional basketball team, was sued for violations of the TCPA after it sent text messages to numerous individuals. The basketball team tendered the suit under its D&O policy.  The insurer denied coverage on the basis that the policy barred coverage for any claim “based upon, arising from, or in consequence of … invasion of privacy.” After disputing the denial, the basketball team filed a coverage action against the insurer, arguing that the underlying suit alleged only economic injuries and did not seek damages for the violation of privacy interests.  The district court granted the insurer’s motion to dismiss and held that the invasion of privacy exclusion barred coverage for the underlying suit.  The team appealed.

On appeal, the Ninth Circuit affirmed the dismissal in favor of the insurer.  First, after citing the language of the exclusion, the court concluded that the breadth of the exclusion (in light of the “arising from” and “based upon” lead-in language) required only “a minimal causal connection or incidental relationship” between the underlying claim and any invasion of privacy.  Next, the court analyzed the phrase “invasion of privacy” and the TCPA, ultimately concluding that “a TCPA claim is, by its nature, an invasion of privacy claim.”  On that basis, the court held that the complaint, which only alleged violations of the TCPA (and specifically disavowed personal injury claims), was barred by the invasion of privacy exclusion.  It affirmed the dismissal in favor of the insurer on that basis.

In a concurring opinion, one judge concluded that while the underlying claim alleged violations of privacy, the court need not determine that all TCPA claims are necessarily claims for invasion of privacy.  In a dissenting opinion, another judge suggested that because a TCPA plaintiff is not required to prove invasion of privacy, and because the plaintiff in the underlying case expressly disavowed common law invasion of privacy claims, the invasion of privacy exclusion did not apply.