Unauthorized Sharing Of Student Information Found To Be Covered As Invasion Of Privacy

The National Research Center for College and University Admissions (NRCCUA) was covered for “advertising injury” and “personal injury” under its State Farm liability policy for using information it gathered on high school students for commercial purposes that were not disclosed, the U.S. Eighth Circuit Court of Appeals has ruled. The case is State Farm Fire and Casualty Co. v. National Research Center for College and University Admissions, 2006 WL 590363 (March 13, 2006).
NRCCUA is an organization that gathers information from millions of high school students to provide to college admissions offices. The organization was investigated by the Federal Trade Commission beginning in 2001 for unauthorized commercial use of student survey information. Eventually, NRCCUA and the FTC entered into a consent decree ordering the organization to stop misrepresentations and make clear and conspicuous disclosures. NRCCUA’s Commercial General Liability policy, the court said, covered the violations because they were “advertising injury” or “personal injury.” For both terms, the policy includes the definition “oral or written publication of material that violates a person’s right of privacy.”
State Farm argued the FTC complaint, and a later lawsuit by 26 state attorneys general, were over misrepresentations, not invasions of privacy. The court disagreed, giving an ordinary plain reading to the term “right of privacy.” The court also found that the word “damages” in the policy included equitable relief, and therefore said State Farm had a duty to defend NRCCUA in both the FTC and state actions. Most of the approximately $300,000 NRCCUA paid as a result of the lawsuit by the state attorneys general, however, was not covered as damages because it was in the nature of a fine or penalty.

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