ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Wednesday, January 5, 2005

Cases—Interpetation—Junk fax to corporation isn’t “invasion of privacy” for insurance coverage

Illinois_4 A mailer of junk advertising faxes can’t get its insurer to cover its statutory liability to angry recipients, according to a new opinion by Judge Frank Easterbrook of the U.S. Court of Appeals for the Seventh Circuit.

Capital Associates sent an unsolicited faxed advertisement to a hauling firm, allegedly in violation of the Telephone Consumer Protection Act.  The hauler, not pleased, brought a class action on behalf of all of those who got the junk faxes. Capital claimed coverage from its insurer, American States Insurance on the ground that this was an "advertising loss" covered by its policy.  American agreed to defend the suit, but reserved its rights, and then brought an action for declaratory judgment.  The district court held for Capital.

The Seventh Circuit reversed. "Advertising loss" was defined under the policy as "oral or written publication of material that violates a person’s right of privacy."  Another provision excluded injury that was "expected or intended from the standpoint of the insured."  In a case of first impression at the appellate level, the court, applying Illinois law, held that an unsolicited fax is not an invasion of a business’s privacy, and the annoyance and waste of fax paper was fully intended by the insured.  The mailer would therefore have to pay its own damages.  American States Ins. Co. v. Capital Assoc. of Jackson County Inc., 7th Cir., No. 04-1659 (Dec. 23. 2004).

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