TCPA lawsuits are expensive. So when Colorado company Mesa Laboratories, Inc. faced a class action for its unsolicited faxes promoting dental-industry-related services, it turned to its insurance company for coverage. The insurance company refused, citing an exclusion in the policy for any claims “arising out of” the TCPA. The District Court upheld the insurer’s coverage decision and the Seventh Circuit affirmed. Mesa Laboratories, Inc. v. Federal Insurance Company, No. 20-1983, 2021 U.S. App. LEXIS 11365 (7th. Cir. April. 20, 2021).
As the Seventh Circuit explained, the “question in this case is straightforward: When an insurance policy provides that the insurer has no duty to defend its insured against any claim ‘arising out of’ the TCPA, does that exclusion extend to common-law claims arising from the TCPA-violating conduct?” The short answer is yes.
The TCPA plaintiff’s claims included “common-law conversion, nuisance, and trespass to chattels for Mesa’s appropriation of the recipients’ fax equipment, paper, ink, and toner.” Meanwhile, the policy provided a broad exclusion of TCPA claims:
[The policy] does not apply to any damages, cost or expense arising out of any actual or alleged or threatened violation of . . . [the TCPA] . . . or any similar regulatory or statutory law in any other jurisdiction
Applying recent Seventh Circuit precedent, the Court concluded that “arising out of” in the policy “subjects the common-law claims to the exclusion.” That is because the “‘arising out of’ phrase presents a ‘but-for’ inquiry: if the plaintiff would not have been injured but for the conduct that violated an enumerated law, then the exclusion applies to all claims flowing from that underlying conduct regardless of the legal theory used.” Since none of the plaintiff’s “injuries would have occurred but for Mesa’s sending unsolicited fax advertisements,” the insurance did not provide coverage.
This is an important case for businesses considering their insurance or facing a TCPA lawsuit. Even common law claims “arising out of” TCPA lawsuits may not be covered.