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Insurable Interests

Allegations in class action complaint trigger insurance policy’s TCPA exclusion

January 04, 2017

fax machineStating that Wisconsin law does 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,” the Wisconsin Court of Appeals recently affirmed a finding of no coverage for claims plead pursuant to the Telephone Consumer Protection Act (TCPA), due to a TCPA exclusion. The decision also recognizes the breadth of the exclusion and that it applies even when the same allegations are re-cast as separate causes of action.

In State Farm Fire & Casualty Company v. Easy PC Solutions, LLC, the court affirmed a trial court ruling that State Farm Fire & Casualty Co. had no duty to defend its insured in a class action suit alleging violations of the TCPA, due to a TCPA exclusion in State Farm’s policy. The lawsuit arose out of unsolicited or “junk” faxes that the insured, Easy PC, sent to Wilder Chiropractic, Inc. on three separate days between Sept. 30 and Oct. 18, 2010. These unsolicited faxes are prohibited by the TCPA.

After receiving the faxes, Wilder sued Easy PC, alleging violations of the TCPA as well as conversion. Easy PC tendered its defense to its insurer, State Farm, which refused to provide a defense because its insurance policy contained an exclusion barring coverage for any claim “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….” Easy PC settled the lawsuit and State Farm subsequently brought a declaratory judgment action to resolve the coverage dispute, and the trial court found that State Farm had no duty to defend Easy PC.

The Wisconsin Court of Appeals affirmed, holding that the conversion claim was subject to the TCPA exclusion even though that cause of action had different elements. The court stated “[a]ll of the actions that Wilder’s complaint alleges Easy PC took that give rise to the conversion claim are the same actions alleged to give rise to the TCPA violation.” Accordingly, coverage for those claims was expressly excluded by the TCPA exclusion.

A second issue in the case was whether the complaint alleged improper faxes prior to the 2010-2011 policy period, which was important because those policies did not contain a TCPA exclusion. Wilder argued that the class included persons who received faxes from Easy PC four years and six years before commencing the class-action lawsuit, implicating earlier State Farm policies. The Court rejected this argument too, as the complaint was utterly devoid of any allegation that Easy PC transmitted faxes on dates other than the three specific days in September and October 2010. 

Although this case should give some comfort to insurers considering coverage for class action allegations, we note that the outcome may have been different if Wilder had included allegations in its complaint alleging violations of the TCPA pre-dating the policy period that included the TCPA exclusion.

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