Court Finds Alleged “Blast Fax” Invasions Of Privacy Create Duty To Defend

Two insurers had a duty to defend a company against allegations of invasion of privacy in a consumer class action, a federal district court in Texas has decided. The company had distributed advertising “blast faxes” to thousands of people, and was sued under the Texas Consumer Protection Act.
The insurers had claimed there was no duty to defend under Commercial General Liability policies issued to the insured. The policies covered “advertising injury” caused by “publication” of materials that violated someone’s “right to privacy.” The insurers maintained that publication of private information about someone was intended to be covered, not invasion of privacy through the sending of advertising faxes. The court disagreed, saying the terms were not specifically defined in the policies, and a plain reading of the terms left them open to multiple interpretations.
As a result of the court’s decision, the insurers were required to repay defense fees and costs of more than $900,000 to an excess insurer that provided a defense. The case is Nutmeg Ins. Co. v. Employers Ins. Co. of Wausau, 2006 WL 453235 (N.D. Texas February 24, 2006).
UPDATE: For more information on how courts have reacted to insureds’ attempts to secure defense and indemnity in blast fax cases, read this post by Marc Mayerson in his blog, Insurance Scrawl.

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