10th Circuit: Insurer Owed Duty To Defend In Blast Fax Class Action

The U.S. Tenth Circuit Court of Appeals found that sending a “blast fax” constituted both “advertising injury” and “property damage” under a Commercial General Liability policy. The insurer therefore had a duty to defend against a consumer lawsuit, the court said. The case is Park University v. American Casualty Co. of Reading, Pa., 2006 WL 766750 (March 27, 2006). A blast fax is a mass, repeat faxing of materials, usually some sort of advertising. A number of courts have decided blast fax cases recently because the federal Telephone Consumer Protection Act creates an incentive for people to sue, often in class actions, over the receipt of unsolicited faxes. Some claims are brought under similar state laws.
As Park University points out, two circuits, the Fourth and Seventh, have found blast fax liabilities are not covered as advertising injuries. The Fifth, Eighth and Eleventh circuits have decided they are covered. The main dispute has been whether blast faxes are “oral or written publication of material that violates a person’s right of privacy” and therefore constitute advertising injuries. These terms, however, are usually not defined by a CGL, forcing courts to decide if “right of privacy” refers only to a right to have your secrets kept, or whether it also includes a right to be left in seclusion. The Tenth Circuit agreed with other courts that found the term comprises both meanings.
The Tenth Circuit also found that the sending of the fax that triggered the lawsuit constituted “property damage” under the policy, because the fax used the printer’s ink. Nevertheless, the insurer said, because the fax was sent intentionally, it could not constitute an accident and therefore was not an “occurrence.” However, in this instance, the fax apparently was requested by an employee of the firm that owned the fax, and the faxer sent it believing the fax would be welcome. The court reasoned that the alleged injury was unintentional from the standpoint of the insured, and therefore the alleged harm could be seen as accidental. Here’s more on the case from Marc Mayerson.
An interesting part of the Tenth Circuit’s decision is the court’s observation that “right of privacy,” lacking further definition in the policy, should be construed in the ordinary sense, or in other words, from the perspective of the average insured who doesn’t spend much time analyzing insurance policies. Insurers, of course, can react to this by limiting the scope of advertising injury through a narrow definition that says a right of privacy refers only to secrets, and not to seclusion. I suspect a number of insurers are already considering such a change.

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