Common Law Claims Associated with Unsolicited Faxes Deemed “Resulting from” Violation of the TCPA | Wiley Rein LLP
The United States Court of Appeals for the Seventh Circuit, enforcing Illinois law, ruled that the tort claims for the erroneous faxes arose out of the Consumer Telephone Protection Act (TCPA) in order to trigger an exclusion in the relevant insurance policy. Mesa Labs., Inc. v. Fed. Ins. Co., 2021 WL 1538230 (7th Cir. April 20, 2021). The Court held that because the tort claims arose out of the same conduct as the statutory claims, which were clearly prohibited by the exclusion, the exclusion applied to the whole of the underlying lawsuit, and it there was no obligation to defend oneself.
Insured sent faxes promoting their dental industry events. However, some of the recipients did not consent to receive these faxes, and the faxes did not include a takedown notice. Due to the erroneous faxes, the insured was the subject of an alleged class action lawsuit by a Chicago area dentist alleging a violation of the TCPA and the Consumer Fraud Act and Illinois Deceptive Business Practices. The lawsuit also included actions in common law tort for conversion, nuisance and intrusion into movable property for the appropriation by the insured of the fax equipment, paper, ink and toner of the recipients.
The insurer refused coverage under an exclusion from the information laws, which provided that the policy “does not apply to damages, losses, costs or expenses resulting from an actual, alleged or threatened violation of the law. . . . the Consumer Telephone Protection Act of the United States of America (TCPA) of 1991. . . or any other similar regulatory or statutory law in any other jurisdiction. The exclusion clearly prohibited coverage of statutory claims, but there was a dispute as to whether it prohibited coverage of common law tort claims. The United States District Court for the Northern District of Illinois allowed the insurer’s motion for judgment on the pleadings, ruling that the exclusion from the information laws applied to all of the action and that the insurer was under no obligation to defend itself.
The Court of Appeal affirmed, concluding that the expression “resulting from” required an investigation “in the absence of”. In other words, if the claimant would not have been harmed had it not been for the conduct which violated the relevant law, then the exclusion should apply to all claims arising out of that underlying conduct, regardless of the legal theory under from which the claim was invoked. The Court held that in this case the conduct underlying the statutory and common law claims was the same: the sending by the insured of unsolicited faxes. Therefore, the exclusion of information laws applied and the insurer was under no obligation to defend itself.