Lakers Basketball Team Misses Hoop in Robotext Insurance Suit

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By Jimmy H. Koo

The Los Angeles Lakers Inc. can’t force their insurer to cover the costs of defending a lawsuit alleging that the NBA team sent game attendees text messages without consent using an automatic dialing system in violation of federal law, a federal appeals court affirmed Aug. 23 ( Los Angeles Lakers, Inc. v. Fed. Ins. Co. , 2017 BL 295269, 9th Cir., No. 15-55777, 8/23/17 ).

In a majority opinion written by Judge N.R. Smith, the U.S. Court of Appeals for the Ninth Circuit agreed with Federal Insurance Co. that a Telephone Consumer Protection Act (TCPA) claim is “inherently an invasion of privacy claim,” which the insurance company explicitly included in the policy’s broad exclusionary clause.

The case underscores that companies with insurance policies that exclude privacy-related claims may want to clarify whether their insurers consider TCPA telemarketing claims to fall within the exclusion.

Judge Stephen Joseph Murphy concurred in the court’s conclusion. Judge Richard C. Tallman dissented, saying that he would have reversed the trial court’s dismissal of the Lakers’ claims because the TCPA isn’t inherently an invasion of privacy statute.

Implicit Privacy Invasion Claims

According to the appeals court, in October 2012, during a Lakers’ home game, the scoreboard displayed a message inviting attendees to send a text message to be displayed on the board.

Once consumers sent a text, the Lakers, using an automatic dialing system, responded with the text message, “Not all msgs go on screen,” and provided instructions to stop messaging alerts. One of the game attendees filed a class action suit against the Lakers, alleging violations of the TCPA.

The Lakers asked their insurance provider, Federal Insurance Co., to defend them in the lawsuit. However, Federal Insurance denied coverage, concluding that the class complaint involved allegations of invasions of privacy, which were specifically excluded from coverage.

The Lakers sued Federal Insurance. The trial court dismissed the suit, concluding that TCPA claims are “implicit invasion-of-privacy claims” that fall squarely within the policy’s exclusionary clause. The Lakers appealed.

Affirming, the appeals court held that “a TCPA claim is an invasion of privacy claim, regardless of the type of relief sought.” The court said that Federal Insurance would have had to defend the suit “if the facts alleged or known could support a claim other than a TCPA claim.”

Dissenting, Tallman said that the TCPA wasn’t only enacted “to prevent invasions of privacy.” The statute specifically addresses public safety concerns, protects businesses, and provides redress for economic injury, Tallman said. “Not all TCPA claims are privacy claims,” he said.

The Lakers didn’t immediately respond to Bloomberg BNA’s email request for comment.

Liner LLP represented the Lakers. Seltzer Caplan McMahon Vitek represented Federal Insurance Co.

To contact the reporter on this story: Jimmy H. Koo in Washington at jkoo@bna.com

To contact the editor responsible for this story: Donald Aplin at daplin@bna.com

For More Information

Full text of the opinion is available at http://src.bna.com/rVj.

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