SAN FRANCISCO — Violations of the Telephone Consumer Protection Act (TCPA) should automatically be considered invasions of privacy, leaving corporate defendants and not insurers to shoulder hefty defense costs, the U.S. Court of Appeals for the 9th Circuit has ruled.

But insurance and legal experts think the issue could be litigated again because of holes in the court's split panel decision.

An appeal to the U.S. Supreme Court or an en banc hearing of the full 9th Circuit is not expected because neither is likely to take up what is essentially a contractual interpretation dispute, said Kevin LaCroix, an attorney who is part of a firm that advises companies navigating the complicated and often costly field of insurance contracts.

The case involving the Los Angeles Lakers has its roots in a class action initiated after an individual claimed his rights were violated under provisions of the TCPA, which was passed in 1991 to protect against invasions of privacy.

Insurance companies routinely include provisions that state they will not be liable for defense costs if litigation arises claiming invasion of privacy. In its ruling, the 9th Circuit held that the very fact that a TCPA violation was claimed means it translates into an invasion of privacy.

And that means the insurance company does not have to cover the costs.

"But this ruling has not settled the arguments," LaCroix told the Northern California Record. "It leaves room for further argument that a future claimant could make"

LaCroix is executive vice president with RT ProExec, insurance experts focused exclusively on management-liability issues.

This dispute has its roots in an October 2012 Lakers game. David M. Emanuel, who attended a game at the Staples Center, saw a message on the scoreboard that invited people to text a specific number. Emanuel sent a text message to the number, believing it would be displayed on the scoreboard.

Instead, Emanuel received a text back. He sued in November 2012, citing violations of the TCPA, and a class action ensued.

Though Emanuel's case was dismissed, the Lakers spent money defending the case under a presumption that legal costs were covered under its liability insurance contract with Federal Insurance, a subsidiary of the Chubb Corp.

"These are hefty defense fees," LaCroix said.  

The 9th Circuit panel was not clear and had three different opinions over whether a TCPA claim is immediately an invasion of privacy, LaCroix said. Echoing the dissenting court opinion, he said the plaintiff did not claim invasion of privacy in the initial complaint; rather, he claimed TCPA violations.

"They disagreed trying to answer the question whether invasion of privacy is automatically assumed with a TCPA claim," LaCroix said.

The Lakers did not reply to requests for comment.

"This fight was over defense costs – we can assume it is about money – and it cost a lot, and (the Lakers) believed it was covered by the policy," LaCroix explained.

Federal Insurance disagreed and argued the contract states that a claim under the TCPA automatically makes null and void payment under the invasion-of-privacy clauses.

"It is our policy not to comment on litigation issues," Eric Samansky, a Chubb communications manager, told the Northern California Record in an email.

In his opinion, Judge N. Randy Smith said that when Congress passed the TCPA, it sought to protect individuals against invasions of privacy.

"Congress explicitly stated this purpose in the text of the TCPA," Smith wrote. "In light of this plainly stated purpose, and the lack of any other indicia of congressional intent in the statute, a TCPA claim is, by its nature, an invasion of privacy claim. Accordingly, a liability insurance policy that unequivocally and broadly excludes coverage for invasion of privacy claims also excludes coverage for TCPA claims." 

Judge Stephen Murphy, a designate from Michigan, concurred but added a written caveat that the TCPA claim cannot always be an invasion of privacy.

Judge Richard Tallman, dissenting, wrote that any TCPA plaintiff must prove invasion of privacy, and Emanuel never claimed invasion of privacy. 

"A TCPA claim is not automatically a privacy claim," Tallman wrote. "And because Emanuel expressly disavowed his privacy claims and instead sought recovery under the TCPA, his claims were not common law privacy claims. They were statutory TCPA claims."

Many insurance companies include invasion-of-privacy clauses when drawing up contracts with companies. LaCroix suspects these contract disputes over who pays for the legal costs and whether they are covered by policies will increase as the number of TCPA claims rises.

"This kind of underlying case becomes very popular with plaintiff lawyers ... these law suits trying to establish that hundreds or thousands are subject to conduct that violated the TCPA," LaCroix said.

It is then in the best interests of companies to keep fighting over who pays and seek to put the responsibility ob insurance companies, LaCroix said. 

But insurance companies will fight back.

"The Supreme Court is not going to take up a contractual interpretations issue," LaCroix said, adding that it could be reviewed by the whole 9th Circuit, en banc, but he doubts that will happen.

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