Insurance Carrier of Junk Fax Sender Has No Duty To Defend

A junk fax sender is not entitled to have its insurance company defend or indemnify when the sender is sued for sending unsolicited faxes.

The sender, Capital Associates of Jackson County, Inc., was insured by American States Insurance Company. The policy covered “advertising injury.” Capital Associates was sued by JC Hauling Company as a class-representative when JC Hauling received an unsolicited fax from Capital Associates, alleging a violation of 47 U.S.C. 227(b)(1)(C) that prohibits the sending of unsolicited advertising faxes.

The insurance policy defined “advertising injury” as “written publication of material that violates a person’s right of privacy.” American States argued that the junk fax was outside of the definition and thus had no duty to defend Capital Associates.

The Seventh Circuit agreed with American States, reversing the lower court’s decision. The appellate court found there are two types of privacy-secrecy and seclusion. “A person who wants to conceal a criminal conviction, bankruptcy, or love affair from friends or business relations asserts a claim to privacy in the sense of secrecy. A person who wants to stop solicitors from ringing his doorbell and peddling vacuum cleaners at 9 p.m. asserts a claim to privacy in the sense of seclusion,” Judge Easterbrook wrote. The appellate court found that the definition in the policy required that the injury be caused by a “publication.” In the junk fax situation, the issue is seclusion, so publication is irrelevant. As a result, the court held “that an advertising injury clause of the kind in American States’ policy does not cover the normal consequences of junk advertising faxes.” Thus, American States had no duty to defend.

American States Insurance Co. v. Capital Associates of Jackson County, Inc. Seventh Cir. No. 04-1659