South-Western Legal Studies in Business

Sending Junk Faxes in Violation of Federal Law Due No Insurance Protection
Description Appeals court held that a firm that sent junk faxes to other companies in violation of federal law, and was sued by the recipients, could not receive coverage under its commercial general liability policy, as no coverage is due for such an illegal act.
Topic Insurance
Key Words Commercial General Liability; Advertising Injury; Junk Faxes; Tort
C A S E   S U M M A R Y
Facts Capital Associates of Jackson County sent a junk fax to another company in violation of the federal rule against sending unsolicited faxes. The recipient launched a class action suit on behalf of all junk fax recipients. Capital demanded that American States Insurance, which sold Capital a commercial general liability insurance policy, defend Capital. The policy has a provision covering "advertising injury." American States refused to defend Capital, so Capital filed suit. The trial court held that the insurer had a duty to defend. American States appealed.

Reversed. Sending a junk fax in violation of federal law is outside the advertising injury coverage of the policy. Advertising injury is an oral or written publication of material that violates a person's right of privacy. The privacy in question is secrecy-the desire of a party not to have an embarrassing fact revealed or the improper disclosure of credit records and Social Security numbers. The receipt of a fax at a business is not an invasion of privacy. Businesses do not operate in seclusion, as they are open for business. In general, businesses lack privacy interests that individuals have. Furthermore, the sending of a junk fax is within the intentional-tort exclusion of the policy. Capital intended to send the faxes in violation of federal law. It receives no insurance protection.

Citation American States Insurance Co. v. Capital Associates of Jackson County, Inc., 392 F.3d 939 (7th Cir., 2005)

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