519 P.3d 992
Cal.2022Background
- Yahoo! faced putative class actions alleging TCPA violations for unsolicited text messages and sought defense/indemnity under a National Union CGL policy.
- The policy's "personal injury" coverage included "oral or written publication, in any manner, of material that violates a person’s right of privacy."
- Endorsement No. 1 removed a TCPA-specific exclusion, limited coverage to "personal injury" (narrower than standard "personal and advertising injury"), and retained an advertising-injury exclusion for privacy in advertisements.
- The federal district court applied the rule of the last antecedent and held the policy covered content-based (secrecy) privacy claims but not seclusion-based TCPA claims, so insurer had no duty to defend.
- The Ninth Circuit certified the coverage question to the California Supreme Court, which held the coverage language ambiguous and ruled that such a policy can cover right-of-seclusion/TCPA claims if consistent with the insured’s objectively reasonable expectations; further factual and contractual inquiry required.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Scope of the coverage clause — does "...publication...of material that violates a person’s right of privacy" cover seclusion/TCPA (means/manner) claims? | The clause can be read to cover conduct-based seclusion (TCPA) claims, especially after Endorsement No. 1 removed the TCPA exclusion. | The restrictive clause modifies only "material," limiting coverage to content-based (secrecy) disclosures; TCPA seclusion claims are not covered. | The clause is ambiguous; it can cover seclusion/TCPA claims if that coverage aligns with the insured’s objectively reasonable expectations; remand for further proceedings. |
| Applicability of the last antecedent rule to resolve ambiguity | Last antecedent is not dispositive; modifier can apply to the whole phrase. | The last antecedent rule requires reading the modifier as applying only to the immediately preceding word ("material"). | The last antecedent rule does not resolve the ambiguity here. |
| Effect of Endorsement/advertising-injury exclusion and other endorsements on duty to defend | Endorsement No.1 expanded coverage (removed TCPA exclusion) and thus supports a defense obligation. | The advertising-injury exclusion and other endorsements (e.g., Statute Endorsement) may negate coverage; factual record unclear. | Court declined to resolve; these provisions may affect coverage and duty to defend and require further factual/contractual development. |
| How to resolve ambiguity (interpretive rules and contra proferentem) | Ambiguities should be construed to protect insured’s reasonable expectations; endorsement was negotiated but contains standard-form language. | The manuscript endorsement suggests bargaining; insurer may not be solely responsible for ambiguity. | Standard interpretive rules failed to resolve the ambiguity; courts must consider the insured’s objectively reasonable expectations and, if needed, construe unresolved ambiguities against the drafter (insurer) because disputed language was standard form. |
Key Cases Cited
- ACS Systems, Inc. v. St. Paul Fire & Marine Ins. Co., 147 Cal.App.4th 137 (Cal. Ct. App. 2007) (applied last-antecedent reading to limit "publication...material that violates privacy" to content/secrecy claims)
- State Farm Gen. Ins. Co. v. JT’s Frames, Inc., 181 Cal.App.4th 429 (Cal. Ct. App. 2010) (similar application limiting coverage to content-based privacy injuries)
- Penzer v. Transp. Ins. Co., 29 So.3d 1000 (Fla. 2010) (rejected strict last-antecedent reading; held modifier could cover manner/publication)
- Duguid v. Facebook, Inc., 926 F.3d 1146 (9th Cir. 2019) (TCPA liability can extend to automated text messages)
- Satterfield v. Simon & Schuster, Inc., 569 F.3d 946 (9th Cir. 2009) (TCPA applies to text-message communications)
- Palmer v. Truck Ins. Exchange, 21 Cal.4th 1109 (Cal. 1999) (contract interpretation principles: clear policy language governs)
- Boghos v. Certain Underwriters at Lloyd’s of London, 36 Cal.4th 495 (Cal. 2005) (ambiguities interpreted to protect insured’s objectively reasonable expectations)
- Waller v. Truck Ins. Exchange, 11 Cal.4th 1 (Cal. 1995) (insured must show potential for coverage; insurer bears burden to show exclusions apply)
- Gray v. Zurich Ins. Co., 65 Cal.2d 263 (Cal. 1966) (insurer’s duty to defend when underlying claims potentially fall within coverage)