The Facts of Faxing Coverage

The Illinois Appellate Court has rendered an important decision concerning coverage under the advertising injury provision in a commercial liability policy. In Valley Forge Ins. Co, v. Swiderski,  the question was whether a claim alleging violation of the Telephone Consumer Protection Act (“TCPA”) on account of an insured sending unsolicited fax advertisements gives rise to coverage for written publication of material that violates a person’s right of privacy.  Swiderski Electronics had sent fax advertisements to various individuals without obtaining prior consent.  A putative class action was filed seeking damages for violation of the TCPA and conversion of fax machine toner and paper.  Swiderski tendered the suit to its insurers.  The insurers disclaimed coverage and sought a declaratory judgment that they had no duty to defend or indemnify.  The parties filed cross-motions for summary judgment on the duty to defend and the trial court found that the insurers had a duty to defend under the policies’ advertising injury provision. 

          The decision, which was affirmed by the Illinois Supreme Court, held that coverage under personal and advertising injury is available for violations of the TCPA.  Notably, the court in Swiderski declined to follow the Seventh Circuit’s decision in American States Insurance Company v. Capitol Associates of Jackson County, (the first federal appellate decision to address whether an advertising injury provision covered the sending of unsolicited fax advertisements) which held that coverage for TCPA claims was not covered under the advertising injury provision.  In particular, the court noted that the TCPA protects a fax recipient’s privacy interest in seclusion, and the language of the advertising injury provision reflect that Swiderski and the insurers intended the policies to cover the type of injury to privacy that is the subject of the TCPA claim.  The court’s holding effectively expanded advertising injury coverage from indemnifying against “invasion of privacy torts” to covering intrusion on seclusion type causes of action.

Leily Schoenhaus