- Within The Definition Of 'Advertising Injury' The Phrase 'That Violates A Person's Right Of Privacy' Must Be Construed As Meaning That The Content Of The Material At Issue Violates A Person's Right To Privacy
- May 10, 2010
- Law Firm: McCormick, Barstow, Sheppard, Wayte & Carruth LLP - Fresno Office
State Farm General Ins. Co. v. JT’s Frames, Inc., 181 Cal.App.4th 429 (2010)
The Friedman Group transmitted tens of thousands of unsolicited advertisements via "fax" to a number of parties, including JT’s Frames. JT’s filed a class action against the Friedman Group alleging conversion and violation of the Illinois Consumer Fraud and Deceptive Practices Act. The Friedman Group tendered its defense to State Farm which denied coverage. JT’s ultimately entered into a settlement agreement with the Friedman Group for $19,520,000. As part of the settlement, the parties stipulated to certification of a class and specified that the judgment would be enforceable only against the proceeds of the Friedman Group’s insurance policies. In addition, the Friedman Group assigned to the class its claims and rights under its State Farm policies. State Farm brought a declaratory relief action against JT’s, alleging that it owed no duty to defend the class action and that its policies did not cover the claims alleged. State Farm moved for summary judgment and the trial court granted the motion, concluding that "fax blasting" was not an invasion of privacy under the policies’ "advertising injury" coverage. JT’s appealed.
THE COURT’S RULING
In affirming the trial court, the Court of Appeal noted that the phrase "right of privacy" is commonly understood to mean the right to keep personal information confidential or secret, but could also refer to the right to seclusion or to be free from unwanted intrusions. The court determined that the policies’ advertising injury provisions could cover the claims asserted by JT’s only if the "right of privacy" referred to in the "advertising injury" definition included such a right to seclusion. Applying the appropriate rules of construction, however, the Court concluded that the phrase "that violates a person’s right of privacy" had to be construed to modify the word "material." As such, in order to come within the policies’ definition of "advertising injury," the material at issue had to violate a person’s right of privacy. This would be the case only if the material contained confidential information and violated the victim’s right to secrecy. The Court noted that all of the other definitions of the term "advertising injury" in the policies involved cases where the victim is injured by the content of the advertisement, not in its mere sending and receipt. As such, the Court concluded that the "right of privacy" definition also should reasonably be interpreted as referring to advertising material the content of which violates the person’s right of privacy.
The Court also addressed JT’s contention that fax blasting is covered "property damage" because the recipients’ fax machines and toner are used. The Court concluded, however, that even if considered "property damage," coverage would still not apply to "fax blasting," as the sending of a fax is not an "accident."
THE EFFECT OF THE COURT’S RULING
In order for "invasion of the right of privacy" within "advertising injury" to be covered, the invasion must result from the content of the material.