The Telephone Consumer Protection Act (TCPA) has been the subject of coverage questions within the insurance industry recently.
The TCPA was passed by Congress in 1991 in an effort to stop unsolicited telephone marketing calls and associated telemarketing practices that affected consumer privacy. The statute restricts the use of automatic telephone dialing systems, artificial and pre-recorded messages, and telephone facsimile (fax) machines to send unsolicited advertisements.
The law requires businesses to obtain written consent from consumers for any telemarketing or advertising calls. If a marketer does not meet this requirement, the TCPA provides awards of $500 to $1,500 for each individual unwanted marketing call or text. This can quickly add up to multi-million dollar claims when a company is named as a defendant in TCPA class action litigation.
As might be expected following years of rapid growth in phone usage, TCPA litigation has increased dramatically. Almost 2,000 TCPA lawsuits were filed in the first nine months of 2014 alone, according to the website WebRecon.com.
Defendants in TCPA litigation typically turn to their insurance policies to determine if they have any coverage. In recent years many insurance carriers have added exclusions for TCPA-related claims to the “personal and advertising injury” section of commercial general liability (CGL) policies.
Directors and officers (D&O) and errors and omissions (E&O) policies have also been examined—and litigated— in order to determine whether they provide coverage for damages and defense in TCPA lawsuits.
D&O insurance policies typically consist of up to three major components, as outlined below.
- Side A protects directors and officers against personal loss, including the cost of legal defense, in the event of claims made against them. Side A applies when the corporation does not provide D&O indemnification.
- Side B covers corporate losses when directors and officers are indemnified, but does not apply to the corporation’s liability risk.
- Side C provides entity coverage for the corporation’s own risk in the event of a D&O-related claim.
While the majority of D&O policies (60%) include Side A, B, and C coverage, actual coverage varies across policies.
Many E&O and D&O policies have established a position on treatment of TCPA coverage, and policyholders seeking protection from this risk will want to clearly understand the provisions of their current or prospective policy.
As is the case of most insurance disputes, insureds should carefully review the language of their specific insurance policies. Any questions on what is covered can be addressed to the broker, carrier, or coverage counsel. The best time to establish or update coverage for TCPA claims is either when the policy is written or renewed.
About D&O Insurance Expert Bill Hager
Bill Hager has Directors & Officers expertise in the following areas, among others: (i) directors and officers coverage overall, (ii) the regulation of D&O policies including their terms, conditions, exclusions and coverages, (iii) the marketplace as to D&O policies (iv) insurer claim settlement obligations as to D&O claims, (v) responsibilities of insurance agents as to D&O policies and their duties and obligations in particular as to making their services available to insureds as to D&O coverages, and (vi) the duties and obligations of insureds as to such matters.
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Material for this article was taken from a collection of industry sources relating to the subject.
In all of the general statements here, see the state law of the controlling jurisdiction. Every case is different and circumstances vary widely depending on the governing state law, policy provisions, and related considerations.
This blog is provided for educational purposes only. It is not intended to provide legal advice or an opinion in regard to any topic discussed. The blog should not be used as a substitute for legal advice from a licensed attorney in your state.