Auto-Owners Ins. Co. v. Websolv Computing, Inc., No. 07-3286, 2009 WL 2750263 (7th Cir. (Ill.) Sept. 1, 2009)
In another blast fax case under the Telephone Consumer Protection Act (“TCPA”), 47 U.S.C. § 227, the Seventh Circuit found no duty to defend. Reversing the trial court, the decision by a panel including Justices Easterbrook as chief judge, Cudahy and Sykes, and authored by Sykes, reached a conclusion inconsistent with a number of cases including that by the Supreme Court of Illinois in Valley Forge Ins. Co. v. Swiderski Elec., Inc., 223 Ill. 2d 352 (Ill. 2006).
The act of wrongful conduct included sending an unsolicited fax advertisement to a dental office from one Websolv Computing, Inc., the insured seeking a defense obligation from its carrier.
Iowa, not Illinois law, applied in reaching a contrary conclusion from that reached by Swiderski. The court found that the pertinent Illinois Choice of Law principles compel the application of substantive Iowa law, to wit, the insurance policy was delivered to Websolv, an Iowa corporation, at its Iowa headquarters through an Iowa agency, and the risk is located in that state. Id. at *2.
The court found that the earlier opinion of Judge Easterbrook in Am. States Ins. Co. v. Capital Assoc. of Jackson County, Inc., 392 F.3d 939, 941 (7th Cir. 2004) limiting the invasion of privacy offense to the protection of secrecy interest was not addressed by a suit that only involves seclusion issues.
It predicted that Iowa would follow the Capital Assoc. of Jackson County language, choosing to embrace a minority view on this point.
Gortho does not contend that Websolv's fax advertisement revealed secret or proprietary information about it; rather, it alleges that the unsolicited fax intruded on its right to be left alone. Therefore, the question in this case is whether the “advertising injury” coverage in the CGL policy requires Auto-Owners to defend Websolv in a suit claiming an infringement of Gortho's seclusion interests.
Id. at *4.
Absent precedent, the court in effect anticipated that the Supreme Court of Iowa would reach a decision which was in marked contrast to the rule in Illinois and the majority rule developing nationally.
The court articulated its rule in Capital Assoc., again claiming that it had properly interpreted the policy in accord with applicable principles that Iowa courts would apply.
“Publication” is implicated only where the relevant concern is secrecy; one can violate another's right to seclusion without publicizing anything. See, e.g., Doe v. Mills, 212 Mich.App. 73, 536 N.W.2d 824, 832 (Mich.Ct.App.1995) (“An action for intrusion upon seclusion focuses on the manner in which information is obtained, not its publication; it is considered analogous to a trespass.”) . . . One who knocks repeatedly on another's door late at night or takes photographs of another from across the street may violate the person's seclusion rights even though no “publication” has occurred. We think it stretches the advertising-injury language too far to interpret “publication” to include the type of activity at issue in this case. The TCPA protects seclusion interests irrespective of publication, but the “publication” language in subsection (b) of the policy's definition of “advertising injury” strongly suggests that this coverage only applies to alleged invasions of secrecy interests.
Id. at *5.
Claiming that “context” helps make its definition the only reasonable one, it avoided facing the question as to whether there was ambiguity or even multiple reasonable interpretations requiring construction of the term “publication” against the insurer. It found, instead, that only one potential meaning was pertinent.
The other subsections of the definition of “advertising injury” also support this interpretation. The other three provisions of the advertising-injury definition focus on harm arising from the content of an advertisement rather than harm arising from mere receipt of an advertisement. The surrounding provisions cover advertising-injury claims for libel, slander, misappropriation, and copyright infringement-all of which require the examination of the content of the offending advertisement. It is therefore reasonable to infer that subsection (b) also concerns harm emanating from the content of an advertisement; that is, it is reasonable to read subsection (b) to refer only to violations of secrecy interests. Here, Gortho is not complaining about the content of the fax; rather, it complains that the very fact the fax was sent violated the corporation's right to be left alone under the TCPA. Accordingly, we conclude that the advertising-injury provision does not cover claims brought under the TCPA.
Id. at *6.
The court also rejects coverage under the property damage provision.
The court rejected the notion that no intent was involved. The court noted that since the complaint in the underlying action alleged that Websolv sent the fax and that one Pabrai (the individual defendant in the case) merely “authorized and approved it,” he was acting as Gortho’s agent; therefore there is no separation of insureds; therefore no different standard for evaluating whether an intent is at issue comes into play.
Citing other cases involving often variant and more narrow language, the court reasoned:
See Resource Bankshares Corp. v. St. Paul Mercury Ins. Co., 407 F.3d 631, 639 (4th Cir. 2005) (“It is obvious to anyone familiar with a modern office that receipt is a ‘natural or probable consequence’ of sending a fax, and receipt alone [results in] ... depletion of the recipient's time, toner and paper....”); Am. States Ins. Co., 392 F.3d at 943 (“[J]unk faxes use up the recipients' ink and paper, but senders anticipate that consequence.”).
Id. at *6.
Notably, the court rejected certification to the Iowa Supreme Court anticipating the court would not agree with it on this point, claiming that while the outcome certainly would be determined by the court’s resolution, this is not one of vital public concern more likely to recur since the insurance industry in 2005 began issuing a standard endorsement specifically excluding coverage for TCPA claims.
