YAHOO INC., Plaintiff and Appellant, v. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA, Defendant and Respondent.
S253593
IN THE SUPREME COURT OF CALIFORNIA
November 17, 2022
Ninth Circuit 17-16452;
Justice Jenkins authored the opinion of the Court, in which Chief Justice Cantil-Sakauye and Justices Corrigan, Liu, Kruger, Groban, and Guerrero concurred.
Opinion of the Court by Jenkins, J.
The law of privacy recognizes, among other things, a right to secrecy and a right to seclusion. “[A] person claiming the privacy right of seclusion asserts the right to be free, in a particular location, from disturbance by others. A person claiming the privacy right of secrecy asserts the right to prevent disclosure of personal information to others. Invasion of the privacy right of seclusion involves the means, manner, and method of communication in a location (or at a time) which disturbs the recipient‘s seclusion. By contrast, invasion of the privacy right of secrecy involves the content of communication that occurs when someone‘s private, personal information is disclosed to a third person.” (ACS Systems, Inc. v. St. Paul Fire & Marine Ins. Co. (2007) 147 Cal.App.4th 137, 148-149 (ACS Systems)).1
Privacy injuries that involve the right of seclusion are sometimes actionable under the federal Telephone Consumer Protection Act of 1991 (TCPA) (
Many commercial general liability (CGL) insurance policies provide coverage against liability for privacy violations, but it is not always clear what specific types of privacy violations are covered. The insurance policy at issue here, for example, provides liability coverage for injuries “arising out of ... [o]ral or written publication, in any manner, of material that violates a person‘s right of privacy.” The question we must resolve is whether this language provides liability coverage for right-of-seclusion violations litigated under the TCPA. We conclude that it does, assuming such coverage is consistent with the insured‘s reasonable expectations.
I. FACTS AND PROCEDURAL BACKGROUND
When defendant National Union Fire Insurance Company of Pittsburgh, PA (National Union) declined to defend or indemnify plaintiff Yahoo Inc. (Yahoo!) in a series of putative class action lawsuits alleging that Yahoo!‘s unsolicited text messaging had violated the TCPA, Yahoo! sued National Union in federal district court, alleging breach of contract and seeking to obtain coverage. According to the complaint, National Union sold Yahoo! a CGL policy covering the period when the alleged TCPA violations occurred.2 The policy was in the form of National Union‘s standard CGL policy, modified by various endorsements including a negotiated endorsement called endorsement No. 1 (Endorsement No. 1).
The standard version of National Union‘s policy provided liability coverage for “personal and advertising injury,” which the policy defined as injury arising out of any of seven specified offenses, including “[o]ral or written publication, in any manner, of material that violates a person‘s right of privacy.” The standard policy, however, excluded injuries arising from the distribution of material in violation of the TCPA.
Second, Endorsement No. 1 provided liability coverage only for “personal injury” (as compared to “personal and advertising injury” in the standard version of the policy), and it defined “personal injury” to include injury arising from any of five offenses (as compared to seven offenses in the standard version of the policy). The list of five offenses, however, still included injuries arising from “[o]ral or written publication, in any manner, of material that violates a person‘s right of privacy.”4 Therefore, although Endorsement No. 1 removed coverage for advertising injuries, coverage for injuries to privacy remained.
Third, and related to the second change, Endorsement No. 1 expressly excluded liability coverage for “advertising injury,” which it defined as injury arising from any of four offenses, including “[o]ral or written publication, in any manner, of material in your ‘advertisement’ that violates a person‘s right of privacy.”5 (Italics added.) Therefore, although Endorsement No. 1‘s coverage provision created liability coverage for privacy injuries, the same endorsement expressly carved out liability coverage for privacy injuries caused by material in a Yahoo! advertisement.
Yahoo! argues that its policy — as modified by Endorsement No. 1 — gave rise, at the very least, to the potential for coverage of the TCPA claims alleged against it in the underlying putative class action lawsuits, and
Yahoo! appealed, and the United States Court of Appeals for the Ninth Circuit certified a question of state law to this court. We granted the Ninth Circuit‘s request and rephrased its question (see
II. DISCUSSION
The parties agree that the TCPA creates a statutory cause of action to redress telephonic intrusions that can, depending on the factual circumstances, violate the common law right of seclusion, and the parties also agree
Whether Yahoo!‘s policy covers liability for violations of the right of seclusion, like all questions concerning the scope of insurance coverage, is subject to de novo review. (Waller v. Truck Ins. Exchange (1995) 11 Cal.4th 1, 18.) The relevant principles are well settled. In Palmer v. Truck Ins. Exchange, we said: ” ‘While insurance contracts have special features, they are still contracts to which the ordinary rules of contractual interpretation apply.’ [Citation.] Thus, ‘the mutual intention of the parties at the time the contract is formed governs interpretation.’ [Citation.] If possible, we infer this intent solely from the written provisions of the insurance policy. [Citation.] If the policy language ‘is clear and explicit, it governs.’ ” (Palmer v. Truck Ins. Exchange (1999) 21 Cal.4th 1109, 1115 (Palmer).) Similarly, in Boghos v. Certain Underwriters at Lloyd‘s of London, we said: “Our goal in construing insurance contracts, as with contracts generally, is to give effect to the parties’ mutual intentions. [Citations.] ‘If contractual language is clear and explicit, it governs.’ [Citations.] If the terms are ambiguous [i.e., susceptible of more than one reasonable interpretation], we interpret them to protect ’ “the objectively reasonable expectations of the insured.” ’ [Citations.] Only if these rules do not resolve a claimed ambiguity do we resort to the rule that ambiguities are to be resolved against the insurer.” (Boghos v. Certain Underwriters at Lloyd‘s of London (2005) 36 Cal.4th 495, 501.)7
A. The Coverage Provision of Yahoo!‘s Policy
The policy at issue here provides liability coverage for injuries “arising out of . . . [o]ral or written publication, in any manner, of material that violates a person‘s right of privacy.” We take the word “material” in this context to refer to “[i]nformation, ideas, data, documents, or other things that are used in reports, books, films, studies, etc.” (Black‘s Law Dict. (10th ed. 2014) p. 1124, col. 2.) The clause “that violates a person‘s right of privacy” is a restrictive relative clause with the word “that” as its relative pronoun. According to the rules governing word order in the English language, a restrictive relative clause usually modifies the noun that immediately precedes it, which in this case is the word “material.” In fact, if a restrictive relative clause is located in a place that is remote from the noun it modifies, it is usually described as a misplaced modifier. Hence, Strunk and White advise that a “relative pronoun should come, in most instances, immediately after its antecedent.” (Strunk and White, The Elements of Style (4th ed. 2000) p. 29; see id. at pp. 28-31.) Sometimes, however, the antecedent of a relative pronoun consists of a group of words. In that case, “the relative [pronoun] comes at the end of the group, unless this would cause ambiguity.” (Id. at p. 30.)
Here, it is unclear whether the restrictive clause “that violates a person‘s right of privacy” modifies a group of words or just a single word. Specifically, it is ambiguous whether the clause modifies the entire phrase “[o]ral or written publication, in any manner, of material” or whether it modifies only
In such situations, our first step is to consider whether the standard rules of contract interpretation can resolve the facial ambiguity in the policy‘s language. Then, if the application of those rules fails to resolve the ambiguity, we interpret the provision in favor of protecting the insured‘s reasonable expectations. “Only if these rules do not resolve a claimed ambiguity do we resort to the rule that ambiguities are to be resolved against the insurer.” (Boghos v. Certain Underwriters at Lloyd‘s of London, supra, 36 Cal.4th at p. 501; see Minkler v. Safeco Ins. Co. (2010) 49 Cal.4th 315, 321-322; Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1264-1265.)
1. Application of the Standard Rules of Contract Interpretation
“The mere fact that a word or phrase in a policy may have multiple meanings does not create an ambiguity.” (Palmer, supra, 21 Cal.4th at p. 1118.) Rather, the meaning of the word or phrase must be considered in light of its context. (See State of California v. Continental Ins. Co., supra, 55 Cal.4th at p. 195; Minkler v. Safeco Ins. Co., supra, 49 Cal.4th at p. 322; Bank of the West v. Superior Court, supra, 2 Cal.4th at p. 1265.) Several aspects of the policy at issue here suggest that in the policy‘s coverage provision, the restrictive clause “that violates a person‘s right of privacy” modifies only the word “material,” meaning that, for there to be coverage, the material itself — that is, its informational content — must give rise to the privacy violation.
Courts will favor an interpretation that gives meaning to each word in a contract over an interpretation that makes part of the writing redundant. (See Carson v. Mercury Ins. Co. (2012) 210 Cal.App.4th 409, 420.) Reading the restrictive clause “that violates a person‘s right of privacy” as modifying the entire phrase “[o]ral or written publication, in any manner, of material,” and thus as creating liability coverage for
This reading of the coverage language finds support in various other provisions of Yahoo!‘s policy. As modified by Endorsement No. 1, the policy provides liability coverage for “personal injury,” which it defines to include injury arising from any of five offenses. One of those offenses is the one we have been discussing here (“[o]ral or written publication, in any manner, of material that violates a person‘s right of privacy“), but another offense, one not at issue here, uses parallel phrasing (“[o]ral or written publication, in any manner, of material that slanders or libels a person or organization or disparages a person‘s or organization‘s goods, products or services“). Although the latter offense is not implicated here directly, it is nonetheless relevant. Published material can slander, libel, or disparage a person only by reason of its informational content — it cannot do so in any other way. Therefore, the parallel phrasing between these two offenses supports an inference that both offenses are concerned with the informational content of the published material. (See E.M.M.I. Inc. v. Zurich American Ins. Co. (2004) 32 Cal.4th 465, 475 [“the same word used in an instrument is generally given the same meaning unless the policy indicates otherwise“].) And that, in turn, suggests that the liability coverage for privacy injuries does not extend to violations of the right of seclusion.
In addition, the policy at issue here excludes “[o]ral or written publication, in any manner, of material in your ‘advertisement’ that violates a person‘s right of privacy.” With respect to this advertisement injury exclusion, the content of the advertisement is clearly referenced by the word “material” because the provision uses the phrase “material in your ‘advertisement.’ ” (Italics added.) Again, because this advertisement provision, like the slander provision discussed above, uses phrasing that parallels the provision we are interpreting in this case, a plausible argument can be made that the latter provision is likewise concerned with the content of what is being published. (See E.M.M.I. Inc. v. Zurich American Ins. Co., supra, 32 Cal.4th at p. 475.)
Moreover, it may be that the parties affirmatively intended to modify the policy to cover right-of-seclusion injuries litigated under the TCPA. In its brief in this court, Yahoo! says: “In the National Union Policies, the ‘personal injury’ coverage was deliberately expanded by manuscript endorsement [(i.e., Endorsement No. 1)] to cover specialized risks beyond what was covered by the standard form language. The endorsement removed certain exclusions, including the TCPA liability exclusion, and provided expanded coverage for conduct-based ‘personal injury’ offenses, separate and distinct from content-based ‘advertising injury’ offenses.” (Italics added.) Relying on this conduct-content distinction, Yahoo! argues that, in the context of the coverage provision, the restrictive clause “that violates a person‘s right of privacy” should be interpreted broadly to include conduct that violates a person‘s right of privacy (i.e., right-of-seclusion violations), whereas in the context of the advertising injury exclusion, the same restrictive clause should be limited to content that violates a person‘s right of privacy (i.e., right-of-secrecy violations).
The arguments favoring Yahoo!‘s broad reading of the coverage provision at issue are far from conclusive. However, Yahoo!‘s arguments serve to persuade us that the policy remains ambiguous even when we apply the standard rules of contract interpretation in an effort to clarify the policy‘s meaning. The restrictive clause “that violates a person‘s right of privacy” can reasonably be read to modify the entire phrase “[o]ral or written publication, in any manner, of material,” and the standard rules of contract interpretation do not foreclose that reading.9
2. Insured‘s Reasonable Expectations and Other Considerations
Where, as here, the standard rules of contract interpretation do not resolve an ambiguity in the operative language of an insurance policy, “we
Therefore, “a court that is faced with an argument for coverage based on assertedly ambiguous policy language must first attempt to determine whether coverage is consistent with the insured‘s objectively reasonable expectations.” (Bank of the West v. Superior Court, supra, 2 Cal.4th at p. 1265.) Here, however, the question whether it was objectively reasonable for Yahoo! to expect coverage of its TCPA liability cannot be resolved without further litigation focusing on the scope of the Statute Endorsement, the scope of the advertising injury exclusion, the specific factual circumstances of the alleged TCPA violations (i.e., whether they amount to a right-of-seclusion violation under California law), and perhaps other unresolved issues not presented to this court. In this context, it also merits noting that merely removing an exclusion for TCPA liability is not, by itself, enough to establish coverage of such liability. (See Waller v. Truck Ins. Exchange, supra, 11 Cal.4th at p. 16.)
As regards the next and final step — the rule that we interpret unresolvable ambiguities in favor of the insured — the application of that rule must take into consideration the specific circumstances in which the policy was drafted. The rule derives from the principle of contra proferentem (“against the drafter“), and it is justified on the grounds that the drafter of a contract should bear the responsibility for ambiguities the drafter could have resolved. (See Abraham, A Theory of Insurance Policy Interpretation (1996) 95 Mich. L.Rev. 531, 533.) Therefore, the rule favoring the insured does not necessarily apply where the insured is one of the contract‘s drafters.
Here, sophisticated parties have bargained over the terms of a manuscript endorsement, and the ambiguous coverage provision appears in that manuscript endorsement. In this situation, it is appropriate to ask whether the insurer can be considered the sole drafter of the provision and therefore whether the insurer is solely responsible for the ambiguity in that provision. But even in the case of a manuscript endorsement, ambiguities should be resolved in favor of coverage when the specific ambiguous language is “adopted verbatim from standard form policies used throughout the country.” (AIU Ins. Co. v. Superior Court (1990) 51 Cal.3d 807, 823, fn. 9; see id. at pp. 823-824.) In the present case, despite the characterization of Endorsement No. 1 as a manuscript endorsement — which would normally imply that it contains nonstandard, negotiated
To summarize, we do not find Yahoo!‘s broad reading of the coverage provision to be conclusive. Rather, we agree with Yahoo! that the coverage provision is ambiguous and that the standard rules of contract interpretation do not resolve the ambiguity. Because the provision is ambiguous, we conclude that it must be interpreted in a way that fulfills Yahoo!‘s objectively reasonable expectations, which must be determined in further litigation. Finally, if the foregoing procedures do not resolve the ambiguity, then we resort to the rule that ambiguities are to be resolved against the drafter, and here the insurer is considered to be the drafter of the specific coverage language whose meaning is in dispute.
The federal district court, however, took a different approach, a point that we now address.
B. The Rule of the Last Antecedent
As noted above, the district court relied on the rule of the last antecedent in arriving at its conclusion that the policy in question did not cover the claims asserted against Yahoo!. According to the last antecedent rule, “[r]elative and qualifying words and phrases, grammatically and legally, where no contrary intention appears, refer solely to the last antecedent.” (Sutherland, Statutes and Statutory Construction (1891) § 267, p. 349; see Black‘s Law Dict., supra, pp. 1532-1533.) This rule of construction has been repeatedly recognized and applied by the United States Supreme Court (see, e.g., Lockhart v. United States (2016) 577 U.S. 347, 351; Barnhart v. Thomas (2003) 540 U.S. 20, 26-27; FTC v. Mandel Brothers, Inc. (1959) 359 U.S. 385, 389-390), and it was mentioned by the high court as early as 1799 (see Sims Lessee v. Irvine (1799) 3 U.S. 425, 444, fn. *).
In California, reliance on the last antecedent rule dates back at least a century. As formulated by this court, the rule provides that ” ’ “qualifying words, phrases and clauses are to be applied to the words or phrases immediately preceding [them] and are not to be construed as extending to or including other[] [words or phrases] more remote.” ’ ” (Renee J. v. Superior Court (2001) 26 Cal.4th 735, 743, quoting White v. County of Sacramento (1982) 31 Cal.3d 676, 680; see Los Angeles County v. Graves (1930) 210 Cal. 21, 26-27.) The last antecedent rule is often applied where there is a list of terms, and the qualifying words or phrases follow the last item in the list. (See People ex rel. Lockyer v. R.J. Reynolds Tobacco Co. (2003) 107 Cal.App.4th 516, 530 [“The exemplar application of the last antecedent rule is a case where a modifying phrase appears after a list of multiple items or phrases“].) But more generally, the last antecedent rule can be understood to express the same rules of English word order discussed in part II.A., ante, meaning that a restrictive relative clause usually modifies the noun immediately preceding it. Employing the last antecedent rule in this manner, California courts have held that insurance policies using language similar to the language at issue here cover only right-of-secrecy liability, not right-of-seclusion liability.
In ACS Systems, supra, 147 Cal.App.4th 137, for example, the court applied the last antecedent rule to a group of insurance policies that covered liability for ” ‘[m]aking known to any person or organization written or spoken material that violates an individual‘s right of privacy.’ ” (Id. at p. 143.) The ACS Systems court read the clause ” ‘that violates an individual‘s right of privacy’ ” as modifying only the word ” ‘material,’ ” not as modifying the phrase ” ‘[m]aking known.’ ” (Id. at p. 150.) Hence, the court concluded that for there to be liability coverage, the content of the material, not the manner of making it known, had to violate someone‘s privacy, meaning that the policy provided liability coverage only for disclosures that violated the right of secrecy. (Id. at pp. 150, 152.) A few years later, State Farm General Ins. Co. v. JT‘s Frames, Inc. (2010) 181 Cal.App.4th 429 (JT‘s Frames) reached the same conclusion in a case in which the relevant insurance policies, like the policy at issue here, used the phrase ” ‘publication of,’ ” not the phrase ” ‘making known.’ ” (Id. at p. 447.)10
Not surprisingly, National Union relies on ACS Systems and JT‘s Frames, but Yahoo! directs our attention to decisions from other jurisdictions that have rejected the rule of the last antecedent in the present context. Yahoo! relies,
In our view, the rule of the last antecedent, as articulated in our case law, does not resolve the ambiguity in the policy language at issue here. The rule of the last antecedent states that ” ’ “qualifying words, phrases and clauses are to be applied to the words or phrases immediately preceding [them] . . . .” ’ ” (Renee J. v. Superior Court, supra, 26 Cal.4th at p. 743, italics added.) As noted above, the rule is most readily applied where there is a list of several items, and the modifier comes immediately after the last item on the list. (See People ex rel. Lockyer v. R.J. Reynolds Tobacco Co., supra, 107 Cal.App.4th at p. 530; see also Sutherland, Statutes and Statutory Construction, supra, § 267, pp. 349-351.) Here, however, there is no list of items followed immediately by a modifier; instead, there is the phrase “[o]ral or written publication, in any manner, of material” followed immediately by a modifier. In applying the rule of the last antecedent, if we identify the possible antecedents as either (1) the word “publication,” or (2) the word “material,” then the word “material” would be the last antecedent. But if, instead, we identify the possible antecedents as either (1) the entire phrase “[o]ral or written publication, in any manner, of material,” or (2) merely the final word of that phrase, “material,” then both potential antecedents would qualify as the last antecedent, as each would immediately precede the modifying restrictive clause. Accordingly, the rule does not resolve, in the present case, whether the relative clause “that violates a person‘s right of privacy” modifies just the word that immediately precedes it (i.e., the word “material“) or whether the clause modifies the entire phrase that immediately precedes it (i.e., the phrase “[o]ral or written publication, in any manner, of material“). Therefore, we reach a different conclusion from the courts in ACS Systems, supra, 147 Cal.App.4th 137 and JT‘s Frames, supra, 181 Cal.App.4th 429, and find that the rule of the last antecedent does not resolve the ambiguity that characterizes coverage provisions like the one at issue here.12
National Union asks us to apply the advertising injury exclusion of the policy to conclude that the policy does not cover Yahoo!‘s potential TCPA liability in the underlying lawsuits. In the proceedings up to this point, however, National Union has not litigated the case based on the advertising injury exclusion, and the record before us does not indicate whether the text messages at issue here were advertisements as that term is defined in the policy. Accordingly, we express no view on the question.
III. CONCLUSION
We answer the Ninth Circuit‘s question as follows: A CGL insurance policy that provides coverage for “personal injury,” defined, in part, as “injury . . . arising out of . . . [o]ral or written publication, in any manner, of material that violates a person‘s right of privacy,” can cover liability for violations of the right of seclusion if such coverage is consistent with the insured‘s objectively reasonable expectations. Such a policy can also trigger the insurer‘s duty to defend the insured against a claim that the insured violated the TCPA by sending unsolicited text messages that did not reveal any private or secret information, provided that the alleged TCPA violation amounts to a right-of-seclusion violation under California law. The fact that such a policy has been modified by an endorsement with regard to advertising injuries may affect such coverage and such duty to defend, but we have no occasion to decide that issue here.
JENKINS, J.
We Concur:
CANTIL-SAKAUYE, C. J.
CORRIGAN, J.
LIU, J.
KRUGER, J.
GROBAN, J.
GUERRERO, J.
See next page for addresses and telephone numbers for counsel who argued in Supreme Court.
Name of Opinion Yahoo Inc. v. National Union Fire Insurance Company of Pittsburgh, PA
Procedural Posture (see XX below)
Original Appeal
Original Proceeding XX on request by 9th Circuit (
Review Granted (published)
Review Granted (unpublished)
Rehearing Granted
Opinion No. S253593
Date Filed: November 17, 2022
Court:
County:
Judge:
Counsel:
Jassy Vick Carolan and William T. Um for Plaintiff and Appellant.
Hunton Andrews Kurth, Lorelie S. Masters, Kevin V. Small, Alexandrea H. Young; Reed Smith, Timothy P. Law and Andrew B. Breidenbach for United Policyholders as Amicus Curiae on behalf of Plaintiff and Appellant.
Horvitz & Levy, Mitchell C. Tilner, Steven S. Fleischman, Emily V. Cuatto; Nicolaides Fink Thorpe Michaelides Sullivan, Richard H. Nicolaides, Jr., Daniel I. Graham, Jr., and Jodi S. Green for Defendant and Respondent.
Counsel who argued in Supreme Court (not intended for publication with opinion):
William T. Um
Jassy Vick Carolan LLP
355 South Grand Avenue, Suite 2450
Los Angeles, CA 90071
(310) 870-7048
Steven S. Fleischman
Horvitz & Levy LLP
3601 West Olive Avenue, 8th Floor
Burbank, CA 91505
(818) 995-5824