After incorrectly predicting the Illinois Supreme Court would decide the question of whether “advertising injury” coverage in a standard CGL policy encompassed claims arising out of unsolicited advertisements in the negative, the Seventh Circuit once again turned its prognosticative powers to the question, this time under Iowa law.

In Auto-Owners Ins. Co. v. Websolv Computing, Inc.,  2009 WL 2750263 (7th Cir. Sept. 1, 2009), Auto-Owners sought a declaration that it had no duty to defend Websolv for a suit brought against it by Gortho, Ltd. under the Telephone Consumer Protection Act, 47 U.S.C. § 227, for sending an unsolicited one-page fax advertisement to a dental office. 

The Auto-Owners CGL Policy provided standard-form advertising injury coverage, defining “advertising injury” to denote:

‘Advertising injury’ means injury arising out of one or more of the following offenses:

a.  Oral or written publication of material that slanders or libels a party … or disparages a person’s … goods, products or services;
b.  Oral or written publication of material that violates a person’s right of privacy;
c.  Misappropriation of advertising ideas or style of doing business; or
d.  Infringement of copyright, title or slogan.

Websolv contended that the allegations of Gortho’s claim triggered a duty to defend under subsection (b). Auto-Owners countered that subsection (b) only afforded coverage for “secrecy-based privacy interests rather than seclusion-based privacy interests and that a TCPA suit asserts an invasion of seclusion-based interests.” 2009 WL 2750263, at *4. 

Iowa courts have yet to address the issue. The court declined to certify the question to the Iowa Supreme Court because the issue “is hardly one of vital public concern” and “is not likely to recur because the insurance industry in 2005 began issuing a standard endorsement specifically excluding coverage for TCPA claims.” Id. n. 3. Thus applying an Erie guess, the court concluded that Iowa “would more likely accept the interpretation that Auto-owners advances.” 2009 WL 2750263, at *4.  

The court recognized that the “insurance policy does not define the ‘right of privacy,’ and that phrase can have multiple meanings and refer to a variety of rights.” Id. “The Restatement (Second) of Torts identifies four ways in which one’s right of privacy can be invaded: (1) unreasonable intrusion upon another’s seclusion; (2) appropriation of another’s name or likeness; (3) unreasonable publicity given to another’s private life; and (4) publicity that places another in a false light.” Id. “[T]hese rights” fall into “two broad categories – rights involving secrecy interests and rights involving seclusion interests.” Id.     

Thus understood, “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 Gorthko’s seclusion interests.” The court answered the question in the negative.

In venturing this conclusion, the court was undeterred by its errant conjecture in American States Ins. Co. v. Capital Assocs., 392 F.3d 939 (7th Cir. 2004). There, the court concluded that Illinois Supreme Court would decide that that advertising injury coverage did not encompass TCPA claims. This conclusion was based on two premises. First, “businesses do not enjoy a common-law right to seclusion,” so that it was unlikely that the “right-to-privacy provision in a corporate insurance policy was meant to cover seclusion interests” [this conclusion elides the fundamental fact that the liability insurance provides coverage against third party claims]. Id. Second, “the use of the word ‘publication’ in the provision only covered claims involving secrecy interests.” Id.

Two years later, the Illinois Supreme Court rejected American States. Valley Forge Ins. Co. v. Swiderski Elecs., Inc., 860 N.E.2d 307, 316-17 (ill. 2006). Indeed, the Illinois Supreme Court rejected both premises of the Seventh Circuit’s analysis: “publication” does not entail only those claims that relate to “secrecy;” and, “publication” more broadly denotes “communication,” that is, “in the general sense of communicating to the public.” 

Ever obdurate (if not obstinate), the Seventh Circuit declared that “We stand by our analysis in American States. 2009 WL 2750263, at *5. The court reasoned that Iowa courts would be more receptive to the analysis in American States:

However, Iowa also refers to closely related or associated policy language to illuminate the meaning of insurance-coverage provisions.  … We continue to read the policy’s use of the word ‘publication’ in the advertising-injury definition to narrow the scope of the ‘privacy rights’ referred to in the same clause. The provision provides coverage for ‘oral or written publication of material that violates a person’s right of privacy.’ The most natural reading of this language is that it covers claims arising when the insured publicizes some secret or personal information – not claims arising when the insured disrupts another’s seclusion. 

‘Publication’ is implicated only where the relevant concern is secrecy; one can violate another’s right to seclusion without publicizing anything.

Id.

The court located further support for its interpretation in “the other subsection of the definition of ‘advertising injury.’” 2009 WL 2750263, at *6. “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. Id. (emphasis in original). Thus, “it is reasonable to read subsection (b) to refer only to violations of secrecy interests.” Id. 

On this reading of the policy, the allegations  of Gorthko’s complaint did not trigger a duty to defend because it complained the transmission of the fax “violated the corporation’s right to be left alone under the TCPA.” Id.

Finally, Gorthko’s complaint did not implicate the policy’s property damage coverage because Websolv expected and intended the resulting damage: “While it is true that the one-page fax advertisement consumed a small amount of ink and one page of paper from Gorthko’s machine, this consequence was expected and intended by Websolv.” Id.

The author would like to thank Ian Hale for contributing to this post.