Earlier this month, the California Supreme Court ruled in Yahoo Inc. v. National Union Fire Insurance Co. of Pittsburgh, PennsylvaniaSupreme Court of California No. S253593, ruled in favor of Yahoo, Inc. (Yahoo!), a policyholder seeking coverage for claims under the Telephone Consumer Protection Act (TCPA).
The case came before the California Supreme Court as a certified point of law by the Ninth Circuit Court of Appeals. The Supreme Court reviewed the federal district court’s decision that dismissed the Yahoo! dismissed, entering judgment in favor of the National Union Fire Insurance Company of Pittsburgh, PA (National Union). The High Court disagreed, applying considered California rules on the interpretation of insurance policies, and finding that the commercial general liability policy was ambiguous and consistent with Yahoo!’s objectively reasonable expectations. must be interpreted.
Congress passed the TCPA in 1991 to protect phone users from unwanted robocalls, robottexts, and junk faxes. Yahoo! has been named in a series of putative class action lawsuits alleging that unsolicited text messaging violates TCPA. National Union declined to let Yahoo! alleges in these lawsuits that the policy language in their commercial general liability insurance clearly precludes coverage.
Yahoo’s policy provided for “personal injury” coverage, covering liabilities arising out of five specific “crimes,” including the “[o]posting material, whether oral or written, in any way that violates a person’s right to privacy.” The California Supreme Court was asked to determine whether this standard language obliges an insurance company to defend its policyholder against allegations that the policyholder violated the TCPA violated by sending unsolicited text messages that did not reveal private information about the plaintiffs.
The two courts considered how the clause “which violates a person’s right to privacy” applies to the pre-existing language of the contract – “[o]Public or written publication of any material in any way.”
The federal district court applied the last antecedent rule, which directs a court to determine that a qualifying word or phrase refers to the language immediately preceding the qualifying word, unless that interpretation contradicts the intent of the language. In its analysis, the district court found that the clause “violating a person’s right to privacy” only modifies the word “material.”
The district court found that “material” violates an individual’s personality rights only if the interference relates to privacy contents of the published material. The district court reasoned that TCPA’s claims against Yahoo! if it was the abusive delivery of the text messages, not the abusive content of the messages, the coverage rule did not apply.
Yahoo! appealed to the Ninth Circuit, which asked the California Supreme Court to rule on whether “commercial liability insurance covering ‘personal injury’ defined as ‘injury . . . consist of. . . [o]ral or written publication . . . material infringing on a person’s privacy rights’ triggers the insurer’s duty to defend the insured against the allegation that the insured violated the Telephone Consumer Protection Act by sending unsolicited SMS advertisements that did not reveal private information .” The California Supreme Court accepted the Ninth Circuit’s motion and reworded the question to include a reference to the fact that the policy in question had been amended by an advertising violations affirmation.
Yahoo! asked the California Supreme Court to rule that the modifying phrase “violating a person’s right to privacy” applies to the entire sentence “[o]ral or written publication of any material in any manner” confirming coverage for “any violation of the right to privacy which is based on the publication, including violations of the right to secrecy”.
In his judgment for Yahoo! the court applied standard rules of contract interpretation to resolve this seemingly ambiguous language. The court found that none of the proposed readings of the language definitively resolved the ambiguity. On the one hand, the restrictive clause “which violates a person’s right to privacy” is read as including the entire sentence “[o]ral or written publication of material in any manner” arguably renders the word “material” superfluous as the effect of this reading would be the same if the word “material” were omitted.
However, other aspects of Yahoo’s policy indicate that the policy covers all disclosure-based privacy violations, including violations of the right to confidentiality. The Court recognized that the defamation provision and advertising infringement exclusion only relate to content-based infringements, but these have different wording than the policy language at issue. In addition, personal injury coverage was expanded with an amendment to remove the TCPA liability waiver and “provided additional coverage for behavior based ‘Personal Injury’ offenses, separate and separate from content based ‘Advertising Infringement’ Offenses.” Yahoo! argued that this distinction supports a reading that the Directive applies broadly to violations resulting from conduct that violates an individual’s privacy, while advertising violation is limited to that contents that violates a person’s privacy.
The California Supreme Court found that the federal district court’s application of the last antecedent rule was erroneous because that rule is most applicable when “there is a list with multiple items and the modifier immediately after the last item in the list stands”. For example in White vs Sacramento County, 31cal. 3d 676, (1982), the California Supreme Court applied the rule of last precursor to a California statute that defines a punitive action as “any action resulting in a dismissal, demotion, suspension, salary reduction, written reprimand, or transfer for the purpose of punishment .” There, the phrase “purposes of punishment” only modified the word transcription. However, in this litigation, the policy language at issue does not contain a list directly followed by a modifier. Instead, the policy language contains a sentence: “[o]ral or written publication of any material in any manner” immediately followed by a modifying phrase “violating an individual’s right to privacy”.
Ultimately, since the court could not legally resolve the ambiguity, the court held that the wording of the policies must be interpreted in a way that reflects Yahoo!’s objectively reasonable expectations. be fulfilled.
Now that the California Supreme Court has ruled on this issue, the case is remanded to the Ninth Circuit Court of Appeals. The Ninth Circuit will likely reverse the circuit court’s dismissal and remand pending further trial. Importantly, an endorsement in the National Union policy has removed the exclusion for injuries resulting from violations of the TCPA – a standard exclusion widely used in the insurance industry. This fact certainly supports Yahoo!’s objectively reasonable expectation that it is covered for TCPA claims.
The Bigger Picture
In seeking coverage, California joins the state supreme courts in Florida, Illinois, Massachusetts and Missouri in finding that privacy coverage in standard form general liability insurance policies extends to all types of privacy interests, including the right to be left alone to become right to seclusion. State supreme courts have consistently interpreted this reporting broadly, as they should. Insurance companies could easily limit their policy language to specific types of privacy rights.
The California Supreme Court decision not only provides an important finding in favor of policyholders, but also supports the general view that state courts are better equipped than federal courts to deal with and resolve complex insurance coverage issues using state principles of insurance contract interpretation . The Ninth Circuit Court wisely asked the California Supreme Court to rule on this issue, recognizing the limitations of the federal courts in such cases. Federal courts merely make predictions about state law. State supreme courts are the final arbiters of state law.