Appeals court rules Lakers' insurance company need not cover TCPA settlement

By Karen Kidd | Aug 30, 2017

SAN FRANCISCO (Northern California Record) – An Indiana-based insurance company won't have to cover a Los Angeles Lakers' settlement of a Telephone Consumer Protection Act class action following a U.S. Ninth Circuit Court of Appeals decision that the lawsuit was excepted in the team's policy.

The exception was written into the Lakers' Federal Insurance Company policy for invasion of privacy claims, Ninth Circuit Court Judge N. Randy Smith wrote in the court's majority opinion handed down  Aug. 23. "It is evident from the plain language of the insurance contract that the parties intended to exclude all invasion of privacy claims," Smith wrote.

"We recognize that exclusionary clauses are to be construed against the insurer; but here we must reconcile this rule with our canon of giving effect to the intent of the parties in light of a clause that broadly excludes coverage for any claim originating from, incident to, or having any connection with, invasion of privacy."

In the 3-2 decision, the Ninth Circuit affirmed a lower court ruling that the insurance company of the Lakers' directors and officers does not have to cover settlement of a 2012 class action lawsuit alleging the team violated the TCPA.

The Lakers appealed the lower court's ruling to the Ninth Circuit, which heard oral arguments in the case in February, that FIC didn't have to cover settlement of the text spam class action. In that class action, a fan accused the Lakers of violating the TCPA by sending allegedly unsolicited texts.

Dissenting in the appeals court decision, Judge Richard Tallman countered that TCPA allegations aren't automatically privacy claims and that the class action's initial plaintiff sought relief based only on a technical TCPA violation, not invasion of privacy.

"When a cause of action is defined by specific and unambiguous statutory elements, there is no need to redefine or restrict that cause of action based on the underlying purpose that motivated its enactment," Tallman wrote in his dissent. "In its decision the court errs by rejecting the statutory elements chosen by Congress and redefining a TCPA claim as a narrowly restricted privacy claim."

The case has been closely watched because observers said it could change how insurers pay off - or don't - on directors and officers policies under the TCPA.

The plaintiff in the class action, David Emanuel, said the Lakers violated the TCPA by sending unsolicited text messages to him and other members of the class following an Oct. 13, 2012, game during which fans were encouraged to text messages to a certain number. A U.S. District Court judge dismissed Emanuel's case in April 2013, ruling Emanuel had implicitly consented to receiving a follow-up text once he sent his original message.

Emanuel appealed to the Ninth Circuit as social media companies Twitter and Path lined up behind the Lakers with an amicas brief saying a cottage industry of TCPA plaintiffs’ attorneys had transformed "a statute intended to curb vexatious telemarketing" into a "vehicle for vexatious lawsuits".

Emanuel told the court the following January that he and the Lakers had reached a settlement.

The following September, the Lakers sued Federal Insurance Company for refusing to defend or indemnify the team in the class action litigation under the team's directors and officers policy.

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