Does business insurance cover a TCPA demand or lawsuit?

The exclusion

Around 2005 the standard commercial general liability form added an exclusion for injury arising out of any action that violates the TCPA, the CAN-SPAM Act, the Fair Credit Reporting Act or any similar statute. Nearly every CGL policy issued since carries it, often as the "Recording and Distribution of Material or Information in Violation of Law" exclusion. If your policy has that wording, a TCPA demand is outside the policy on its face.

The penalty problem

Even where a policy is silent, courts have split on whether TCPA statutory damages are "damages" the policy covers or a penalty that public policy will not let you insure. Several have held the $500 and $1,500 figures are punitive in nature and uninsurable. Do not expect a carrier to concede the point.

Where coverage sometimes exists

• Older or non-standard CGL policies without the exclusion, where "personal and advertising injury" for violation of privacy was read to include unwanted calls. Rare now.
• Cyber and media liability policies with a TCPA endorsement. Usually sub-limited and subject to a retention that can exceed a single demand.
• Directors and officers policies where an individual is named personally and the claim is framed as a wrongful act. Depends entirely on the wording.
• Defence costs under a policy that covers defence even where indemnity is doubtful. Some carriers defend under reservation of rights.

What to do

1. Pull every policy: CGL, umbrella, cyber, E&O, D&O. Search for "Telephone Consumer Protection Act" and "distribution of material".
2. Send the demand letter to the broker within days and ask for a written coverage position on each policy. Late notice is its own reason for denial.
3. Plan the response on the assumption that defence and any resolution come from the business's own funds. If coverage turns up, it is a bonus. The ranges are on how much a TCPA defence lawyer costs compared to the demand.

That assumption changes the arithmetic on should I settle: the cost of fighting is not an insurer's cost, it is yours.

Reading the coverage letter

The broker will come back with a letter from each carrier. Three outcomes are common. A denial cites the exclusion by its form number and quotes the wording; read the wording against your letter, because an exclusion written for the TCPA alone may not reach a claim pleaded only under a state statute. A reservation of rights means the carrier will fund the defence for now while keeping the right to stop and to recover what it has paid; take the defence and keep your own notes on what the carrier is told. A request for information is not a denial; answer it in full and on time, since an unanswered request becomes the reason for a later denial.

Whatever the letter says, keep a copy with the demand and your reply. If the matter is later resolved, the release should name the business and not the carrier unless the carrier contributed.