Yahoo Inc. v. Nat'l Union Fire Ins. Co. of Pittsburgh, PA

• Decision Date: 17 November 2022
• Docket Number: S253593
• Citation: 14 Cal.5th 58,519 P.3d 992,301 Cal.Rptr.3d 1
• Parties: YAHOO INC., Plaintiff and Appellant, v. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA, Defendant and Respondent.
• Court: California Supreme Court

14 Cal.5th 58

519 P.3d 992

301 Cal.Rptr.3d 1

YAHOO INC., Plaintiff and Appellant,

v.NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA, Defendant and Respondent.

S253593

Supreme Court of California.

November 17, 2022

Jassy Vick Carolan and William T. Um for Plaintiff and Appellant.

Hunton Andrews Kurth, Lorelie S. Masters, Kevin V. Small, Alexandrea H. Young, Los Angeles; Reed Smith, Timothy P. Law and Andrew B. Breidenbach, Los Angeles, for United Policyholders as Amicus Curiae on behalf of Plaintiff and Appellant.

Horvitz & Levy, Mitchell C. Tilner, Steven S. Fleischman, Emily V. Cuatto, Burbank; Nicolaides Fink Thorpe Michaelides Sullivan, Richard H. Nicolaides, Jr., Daniel I. Graham, Jr., and Jodi S. Green, Long Beach, for Defendant and Respondent.

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, 53 Cal.Rptr.3d 786 ( ACS Systems ).)¹

Privacy injuries that involve the right of seclusion are sometimes actionable under the federal Telephone Consumer Protection Act of 1991 (TCPA) ( 47 U.S.C. § 227 ( section 227 )), provided the violation involves the use of telephonic equipment. Specifically, the TCPA protects the seclusion interests of telephone users by placing restrictions on automated telephone calls ("robocalls") and unsolicited facsimile machine advertisements ("junk faxes"). (See § 227 ; Duguid v. Facebook, Inc. (9th Cir. 2019) 926 F.3d 1146, 1149.) Subject to certain exceptions, the TCPA prohibits making "any call ... using any automatic telephone dialing system ... to any telephone number assigned to a ... cellular telephone service." ( § 227(b)(1)(A)(iii).) The TCPA also prohibits, again subject to exceptions, using "any ... device to send, to a telephone facsimile machine, an unsolicited advertisement." ( Id ., § 227(b)(1)(C).) Significantly, the TCPA's prohibitions have been interpreted to apply to text messages ("robotexts"), not just to voice telephone calls. ( Duguid , supra , 926 F.3d at p. 1149 ; Satterfield v. Simon & Schuster, Inc. (9th Cir. 2009) 569 F.3d 946, 954.)

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.

Endorsement No. 1 modified National Union's standard policy in three important ways. First, Endorsement No. 1 removed the exclusion for injuries arising from violations of the TCPA.³

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 therefore National Union was obligated to defend Yahoo! in those suits, and it breached its contract by declining to do so. (See Gray v. Zurich Ins. Co. (1966) 65 Cal.2d 263, 276–277, 54 Cal.Rptr. 104, 419 P.2d 168.) The federal district court rejected that argument. It granted National Union's motion to dismiss, concluding that the TCPA lawsuits do not fall within the policy's coverage provision because they do not allege an injury arising out of the "publication ... of material that violates a person's right of privacy ." (Italics added.) Focusing on the italicized language quoted above, the district court concluded that this language covers liability for right-of-secrecy violations but that it does not cover right-of-seclusion violations, including right-of-seclusion violations litigated under the TCPA. In reaching this conclusion, the district court applied the rule of the last antecedent, a rule of construction under which a restrictive clause modifies only the word or phrase that immediately precedes it. Applying that rule, the court read the clause "that violates a person's right of privacy" as modifying only the word "material," meaning that for the policy to provide liability coverage, the alleged privacy violation must relate to the content of the published material. Finding that the TCPA claims asserted against Yahoo! focused on the transmission of unsolicited text messages rather than the content of those messages, the federal district court dismissed Yahoo!’s insurance coverage action, entering judgment for National Union.

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 Cal. Rules of Court, rule 8.548(f)(5) ). As rephrased, we are called upon to answer the following question: "Does a commercial general liability insurance policy that provides coverage for ‘personal injury,’ defined as ‘injury ... arising out of ... [o]ral or written publication, in any manner, of material that violates a person's right of privacy,’ and that has been modified by endorsement with regard to advertising injuries, trigger the insurer's duty to defend the insured against a claim that the insured violated the [TCPA] of 1991 ( 47 U.S.C. § 227 ) by sending unsolicited text message advertisements that did not reveal any private information?"⁶

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 that the TCPA is not concerned with disclosures that violate the common law right of secrecy. (See Los Angeles Lakers, Inc. v. Federal Ins. Co. (9th Cir. 2017) 869 F.3d 795, 806 [" ‘[c]ourts have consistently held the TCPA protects a species of privacy interest in the sense of seclusion’ "]; Auto-Owners Ins. Co. v. Websolv Computing, Inc. (7th Cir. 2009) 580 F.3d 543, 549 ["The underlying [TCPA] suit here only involves seclusion interests"]; Resource Bankshares Corp. v. St. Paul Mercury Ins. Co. (4th Cir. 2005) 407 F.3d 631, 642 ["the TCPA's unsolicited fax prohibition protects ‘seclusion’ privacy, for which content is irrelevant"]; American States Ins. Co. v. Capital Associates of Jackson County, Inc. (7th Cir. 2004) 392 F.3d 939, 943 [the TCPA "condemns a particular means of communicating an advertisement, rather than the contents of that advertisement"].) Therefore, if the policy at issue here does not cover liability for violations of the right of seclusion, then it does not cover Yahoo!’s potential TCPA liability in the underlying lawsuits.

Whether Yahoo!’s policy covers liability for...