The U.S. Court of Appeals for the Ninth Circuit ruled in the negative last month on whether the Los Angeles Lakers were entitled to coverage under their Directors and Officers (D&O) policy (Policy) for costs relating to an underlying suit brought against them alleging violations of the Telephone Consumer Protection Act (TCPA). Los Angeles Lakers, Inc. v. Federal Ins. Co., No. 15-55777 (9th Cir. Aug. 23, 2017). On its face, the ruling is favorable to insurers. But given the disparities between the opinions, its ultimate effect is unclear and will be revealed only in its future application.
The Lakers lead opinion adopted the Federal Insurance Company’s (Federal’s) broad argument that a TCPA claim is by definition a claim for invasion of privacy and therefore excluded from coverage under the Policy’s broad exclusion from coverage of claims “based upon, arising from, or in consequence of . . . invasions of privacy” (Privacy Exclusion). Id. at 8-9. To reach its conclusion regarding the nature of TCPA claims, the lead opinion determined that the U.S. Congress enacted the TCPA with the express intent to protect privacy interests so that, “in pleading the elements of a TCPA claim, a plaintiff pleads an invasion of privacy claim.” Id. at 14. That, combined with the very broad meaning the lead opinion gave to the Privacy Exclusion, meant that the Lakers were not entitled to coverage under the Policy.
The lead opinion’s conclusion was joined by a short concurrence that would have upheld the district court decision on much narrower grounds. According to the concurrence, the underlying complaint alleged claims for invasion of privacy because it “alleged several times . . . that the message [the plaintiff] received [from the Lakers] was an invasion of his privacy.” Id. at 20 (Murphy, III, J., concurring). That the specific claims at issue were ones for invasion of privacy was enough to deny coverage under the Policy, without “need[ing] to hold more broadly that a TCPA claim is inherently an invasion of privacy claim.” Id. at 21.
Finally, there was dissent that would have overturned the district court decision and found that there was coverage under the Policy. To reach that conclusion, the dissent reasoned that the analysis had to start with the unambiguous language of the TCPA setting forth the elements of the underlying TCPA claim, which unambiguously does not require any allegation of invasion of privacy. Id. at 24 (Tallman, J., dissenting). The dissent found that dispositive to establish that TCPA claims are not per se claims for invasion of privacy—and since the statutory language was unambiguous, the dissent found no need to consider congressional intent. Id. at 22-24. But, in any event, in enacting the TCPA, Congress had also intended to “address public safety concerns, provide redress for economic injury, and protect businesses from ATDS calls.” Id. at 25 (emphasis added). The latter intent, in particular, showed that TCPA claims are not inherently claims for invasion of privacy because “most states [including California] hold that business entities lack privacy interests” and therefore cannot bring invasion of privacy claims. Id. at 27 (internal alteration & quotation marks omitted).
Finally, the dissent concluded that the underlying claims in this particular case were not based on invasion of privacy because the TCPA plaintiff “did not seek recovery based on invasion of privacy” and “expressly disavowed all claims based on invasion of privacy” by seeking “only damages and injunctive relief for recovery of economic injury” (invasion of privacy is a personal, not an economic, injury). Id. at 29-31. On these bases, the dissent would have reversed the district court’s dismissal of the Laker’s claims against Federal.
What does that all mean? At first blush, the ruling is favorable to insurers and makes it more difficult for policyholders to get coverage for third-party TCPA claims under D&O policies. That is so because of the breadth of the lead opinion, both in characterizing TCPA claims and in construing the policy’s privacy exclusion.
But the ruling is very divided, and even the lead opinion leaves room for further argument. For example, the lead opinion arguably overstates the breadth of the Privacy Exclusion by finding that it applied because the underlying claim “is unquestionably, at the very least, connected to an alleged invasion of privacy.” Id.at 17. The exclusion, however, seems to require more than a “connection;” it seems to require some form of causation. See id. at 9. Moreover, the concurring opinion agreed with the lead opinion only to the extent that the underlying claims in this particular case were ones for invasion of privacy—it would not have gone so far as to characterize every single conceivable TCPA claim as such. And the dissent went even further to find that TCPA claims cannot be categorically characterized as ones for invasion of privacy.
Ultimately, only time will tell how broadly the lead opinion in this case will be applied. In the meantime, in cases seeking coverage for TCPA claims under any policy with a broad privacy exclusion, courts will almost certainly scrutinize the specific TCPA claims at issue to assess their connection to privacy-related claims. Despite its apparent breadth, the Lakers opinion does not seem to foreclose arguments that (1) the specific TCPA claims at issue are not privacy-related; (2) the privacy exclusion at issue is not as broad as stated in the lead opinion (or the lead opinion overstated the breadth of the exclusion); and (3) not all TCPA claims are ones for invasion of privacy.
 It is also possible that the Ninth Circuit itself will clarify or modify these decisions. On September 6, 2017, the Lakers sought en banc review of the panel opinions, and on September 8, 2017, the panel ordered Federal to respond to the Lakers’ request by September 29, 2017. Seehttps://www.law360.com/cases/555f06b3cc4ad17bf0000016/dockets. Moreover, on September 18, 2017, the United Policyholders filed an amicus curiae brief in support of the Lakers’ request for en banc review, arguing that the panel’s lead opinion is “unmoored from the fundamental principles of insurance law that protect all insurance consumers” and contrary to the California Supreme Court’s rules of construction for insurance policies. Brief in Support of Petition for Rehearing En Banc on Behalf of Amicus Curiae United Policyholders, at 2-3 (9th Cir. Sept. 18, 2017). So—stay tuned!