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Dealing with a situation that is annoying, if nothing else, to quite a few businesses, a Wisconsin Court of Appeals decision recently upheld an exclusion within an insurance policy that precluded coverage for allegations that it’s insured violated the Telephone Consumer Protection Act (TCPA) by continually sending faxes (“blast faxes”) without the permission or consent of the recipient.
In the case of State Farm Fire & Casualty Company v. Easy PC Solutions, LLC, et al. (WI Ct. App. No. 2014AP2657), Easy PC was accused by a recipient of repeatedly sending faxes without permission to itself and others and in the process violated the provisions of the TCPA law and committed the act of conversion.
The recipient alleged specific dates on which it received the violating faxes, together with general allegations that Easy PC had, in addition, sent multiple faxes to others over an extended period of time, attempting to assert a class action in the process.
Easy PC tendered defense of the lawsuit to its insurer who refused to provide a defense. Subsequently, the insurer brought a motion for summary judgment which was granted by the circuit court judge. Easy PC appealed.
In its decision, the Court of Appeals upheld the dismissal finding that the subject policy excluded coverage for TCPA and TCPA-related claims and as a result had no duty to defend. The TCPA exclusion in question stated: that the insurer will not insure against “bodily injury, property damage, personal injury, or advertising injury arising directly or indirectly out of any action or omission that violates or is alleged to violate … [t]he Telephone Consumer Protection Act (TCPA), including any amendment of or addition to such law ….”
Even though it was quite clear the alleged faxes violated the TCPA, Easy PC tried to get around the exclusion by asserting the allegation of “conversion” – that the faxes essentially stole the time of recipient employees, caused damages to the loss of paper and toner, etc. – involved different elements than TCPA violations. The Court did not buy into such an argument stating the subject “exclusion is directed at Easy PC’s actions, not the effect of its actions.”
In the course of dealing with Easy PC’s insurer’s duty to defend, the Court stated “an insurer has a duty to defend its insured against a lawsuit if the complaint alleges facts which, if proven, would give rise to liability covered under the terms and conditions of the policy.” Further, the Court went on to say “we do not require an insurer to speculate beyond the written words of the complaint in order to imagine a claim that a plaintiff might be making or to determine all the potential issues that could be sought when the insurer is evaluating its duty to defend.” And, finally, the Court stated “while Wisconsin is a notice-pleading state where complaints are to be liberally interpreted, a complaint cannot rely on discovery to provide requisite factual support.” The Court found as a matter of fact that the complaint did not allege that the other offending faxes occurred at any time outside the subsequent policy period and, as a result, the “potential representation of an expansive class of similarly situated claimants is insufficient to trigger a duty to defend for any policy period untethered to a factual allegation in the complaint.”
If you should have any questions regarding this article or insurance litigation in general, please contact Brad Matthiesen at [email protected].