"UNSOLICITED INFORMATION" ENDORSEMENT, THE

Rough Notes, Jan 2005 by Malecki, Donald S

New liability policy exclusion from ISO targets spammers, junk faxers, and telemarketers

One of the more annoying interferences with business operations occurs when someone sends an unsolicited facsimile advertising a product or service, such as a low-fare vacation package, an opportunity to purchase low-cost health insurance, or a message promoting office equipment at substantial cost savings. These facsimiles commonly state that if recipients do not want to receive future facsimiles, they should call the phone number as shown.

Calling the number to request the cessation of such unsolicited facsimiles appears to be a complete waste of effort, since these transmissions seem to continue, much to the chagrin of those on the receiving end. Adding to the annoyance are the loss of recipients' paper, unnecessary use of cartridge ink, and the time employees take to read and toss these unwanted advertisements into File 13. From the perspective of many, this annoying conduct is an intrusion into the private space of the recipients.

What also may be frustrating to recipients is their inability to return these facsimiles the same way they arrive, except with an insertion of another message to cease and desist, along with a warning that these documents will be part of a class action suit that is likely to result if enough recipients get annoyed enough to hire an attorney. After pondering how good it would feel to do this, perhaps one will conclude that it is just as well that these facsimiles cannot be returned that way, because the person returning a facsimile could also be viewed as being in the same category as the violators themselves!

ISO steps in

In March 2005, if not sooner, ISO will make available a mandatory exclusion for insurers to add to their liability policies. This endorsement is intended to specifically exclude claims and suits alleging bodily injury, property damage, and personal and advertising injury arising from unsolicited facsimiles or other communications that violate or allegedly violate the federal Telephone Consumer Protection Act (TCPA) of 1991, or any similar state statute, ordinance or regulation.

The TCPA defines an unsolicited advertisement as "any material advertising the commercial availability or quality of any property, goods, or services which is transmitted to any person without that person's prior express invitation or permission."

The act addresses not only the use of any telephone facsimile machine, computer or other equipment to send an unsolicited advertisement, but also encompasses telemarketing calls that have become an annoyance in recent years. In fact, the TCPA permitted the Federal Communication Commission to establish a national "do-not-call registry" for consumers who do not want to receive sales pitches from telemarketers.

The new endorsement is titled "Exclusion - Violation of Statutes That Govern E-Mails, Fax, Phone Calls or Other Methods of Sending Material or Information," CG 00 67. Translated, this endorsement is intended to affect violators who send unsolicited facsimiles or computer spam, and telemarketers or persons who have a habit of calling people at the most inopportune times, from both a federal and state law perspective.

Double trouble

Some of the businesses engaged in these marketing practices have been the targets of class action suits for having violated the TCPA. What can be double trouble for violators, who now will be without insurance for any litigation filed against them, is that fines also can be assessed under this federal law, which sets as damages: $500 for each violation/each illegal fax or telephone call, and triple damages when the violations are committed "willfully and knowingly."

Without an exclusion applicable to commercial liability policies, these violators might be able to obtain coverage for the damages they cause by issuing unsolicited communications. If past court decisions are any indication, violators are fairly certain to obtain insurance coverage, despite the efforts of insurers to reject defense and indemnity for damages.

One such recent case is Universal Underwriters Insurance Co. v. Lou Fusz Automotive Network, Inc., 300 Fed. Supp.2d 888 (U.S.D.C. D. Mo. 2004), which involved two auto dealerships and their insurance programs that included garage liability policies.

Class action suits were brought against the two dealerships by two claimants on behalf of all persons harmed by the dealers, alleging unlawful transmission of unsolicited facsimile advertisements that were in violation of the Telephone Consumer Protection Act of 1991. The claimants not only sought injunctive relief, but also the full amount of statutory damages as set forth in the TCPA.

One of the dealers denied that it ever sent unsolicited advertisements and even went so far as to argue that it had not authorized anyone to send these facsimiles on its behalf, nor did anyone have such permission. The other dealer admitted that it had contracted with a company engaged in the distribution of facsimile advertisements and other services to distribute advertisements. This dealer also maintained it did not know the identity of the recipient even though it knew that such facsimiles would be sent.