Class actions involving the Telephone Consumer Protection Act of 1991 (TCPA) are nothing new. What is new is that they recently hit the real estate industry. Worse yet, insurance companies have grown increasingly savvy in excluding coverage for those types of lawsuits. Nonetheless, a smart company might be able to bargain away its questionable insurance rights in exchange for settling a TCPA class action.
That sort of Faustian deal can be struck through a settlement, often called a Coblenz agreement, in which the defendant agrees to a judgment of a certain amount in exchange for assigning its insurance rights to the suing class.
That scenario played out in a new decision by a federal appellate court in Philadelphia, in the case of Auto-Owners Insurance Company v. Stevens & Ricci, Inc. The factual background is depressing because the defendant business hired an advertising company that claimed it had a fax program that complies with TCPA. That turned out to be false, and Stevens & Ricci found itself in the crosshairs of a class action. The company later settled for $2 million and handed over its insurance rights to the class.
At both the trial-court level and the appellate level, the courts found that the company’s policy did not provide coverage. The relevant policy provisions covered “property damage” and “advertising injuries.” No property damage existed, the appellate court ruled, because the faxing was not an accident. And no covered advertising injury took place because the policy protected against only advertisements that infringed on a person’s private information, not her right to be left alone.
What this means for class-action defendants is that there are still plaintiffs’ lawyers out there who realize that their best hope of a big recovery is with dubious insurance rights rather than trying to squeeze mom-and-pop businesses for crazy cash as a result of a TCPA violation.
You should also be aware that TCPA applies to text messages as well. So before you get creative with a text-based advertising program, make sure you run it past your lawyer.