9 N.W.3d 92
Mich. Ct. App.2023Background:
- In March 2006 Top Flite hired a broadcasting service to send unsolicited fax advertisements to 4,271 numbers (including plaintiffs); plaintiffs sued under the TCPA and ultimately obtained judgment; the federal court found Top Flite had no intent to injure recipients.
- Hartford insured Top Flite under a commercial policy (Mar 29, 2005–Mar 29, 2006) that covered "property damage" from an "occurrence" (defined as an "accident") and "personal and advertising injury," but excluded property damage "expected or intended from the standpoint of the insured" and excluded personal/advertising injury "arising out of the violation of a person’s right of privacy created by any state or federal act," with a narrow exception for liability that would exist absent the statute.
- Top Flite sought coverage in 2012; Hartford denied coverage and declined to defend/indemnify; plaintiffs (assignees of Top Flite) sued Hartford in Wayne Circuit Court in July 2019 for declaratory relief to compel indemnity for the unsatisfied portion of the judgment and interest.
- Plaintiffs argued coverage for (a) property damage (toner/paper/fax-machine use) and (b) personal and advertising injury (privacy violation); Hartford argued claims were time-barred and, on the merits, that there was no "occurrence" and the policy exclusions (expected/intended injury and statutory privacy exclusion) precluded coverage.
- The trial court granted Hartford summary disposition (MCR 2.116(C)(10)), holding the statutory privacy exclusion barred advertising-injury coverage because no common-law privacy cause of action for unsolicited faxes existed, and the expected/intended-injury exclusion barred property-damage coverage; this appeal followed.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the policy's "statutory right of privacy" exclusion bar personal and advertising injury coverage for TCPA-based damages? | TCPA merely provides a remedy for intrusion-on-seclusion (a preexisting common-law privacy right), so the exclusion's exception (liability that would exist absent the statute) preserves coverage. | Damages were awarded solely under the TCPA (a federal statute); no common-law privacy cause of action would have existed under these facts, so the exclusion applies and bars coverage. | Exclusion applies; no coverage. Court found no viable common-law privacy claim for unsolicited faxes under these facts, so the exception does not save coverage. |
| Is property-damage coverage triggered because the faxes caused damage to recipients' fax machines/supplies (i.e., was there an "occurrence")? | The use of recipients' fax machines, paper, and toner constitutes property damage and an "occurrence"; coverage therefore applies. | The faxes were intentionally sent; the expected/intended-injury exclusion applies because the insured intended the transmissions and should have expected the resulting use/damage. | No coverage. The transmissions were intentional and foreseeably created the risk of harm; Masters/McCarn line of cases mean the exclusion bars coverage. |
| Is the statutory privacy exclusion ambiguous because later policies specifically referenced the TCPA? | Later explicit TCPA exclusions show insurer did not intend to exclude TCPA claims under the earlier policy, so the earlier exclusion is ambiguous. | The earlier exclusion is clear and not in conflict with other provisions; later policy language does not render it ambiguous. | No ambiguity. The exclusion is clear and enforced as written. |
Key Cases Cited
- Frankenmuth Mut. Ins. Co. v. Masters, 460 Mich. 105 (1999) (intentional acts that create a direct risk of harm are not "accidents," so no coverage for resulting damage).
- Allstate Ins. Co. v. McCarn, 466 Mich. 277 (2002) (clarified Masters: if act was intended but consequences were not, coverage may exist unless insured subjectively created a direct risk of harm the insured should have expected).
- Tobin v. Civil Service Comm'n, 416 Mich. 661 (1982) (describes Michigan common-law privacy torts; unsolicited mailings not actionable as invasion of privacy absent harassment).
- Auto Owners Ins. Co. v. Seils, 310 Mich. App. 132 (2015) (two-step approach to insurance disputes: determine coverage scope, then whether exclusions negate coverage; burdens on insured and insurer).
- Bridging Communities, Inc. v. Top Flite Fin., Inc., 843 F.3d 1119 (6th Cir. 2016) (underlying TCPA class-action and adjudication of liability for unsolicited fax transmissions).