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Yahoo! Case Highlights Issue Of Ambiguity In Insurance Policies

On Behalf of | Jan 30, 2023 | Insurance Coverage Planning, Insurance Recovery |

A current California case is being watched closely by those in the insurance industry because it may bring much needed clarity to the coverage afforded by standard CGL policies for “personal and advertising injury” (or Coverage B as it is sometimes known).  Unlike Coverage A of the standard CGL policy, which affords coverage for property damage and bodily injury claims, Coverage B generally affords coverage for certain enumerated offenses.  One such offense is the right of privacy. However, California courts have struggled to clarify which types of privacy violations are covered.

The suit concerns whether an insurance company, National Union Fire Insurance Co. (National Union), is obligated to cover the insured, Yahoo!, for class action lawsuits alleging Yahoo! violated consumers’ “right to be left alone” by sending unsolicited text messages.

The case has been winding its way through the courts, with various issues being decided in both state and federal courts. Back in 2017, litigation was filed by Yahoo! against National Union due to the insurer’s refusal to defend against the class actions, which alleged that Yahoo! intruded upon their seclusion with the unsolicited messages. The case, at that time in Federal Court, was dismissed in a ruling that focused on transmissions to third parties, which the court felt needed to be alleged before the policy applied. Here, Yahoo! did not release any of the information to third parties, so the court felt that the actions were outside the scope of coverage. Yahoo! appealed.

Several twists and turns later, we now see the case before the California Supreme Court, which was tasked with determining whether the insured had a reasonable expectation of coverage based on the language in the policy.

The California Supreme Court began with the law of privacy, noting that consumers have both a right to secrecy and a right to seclusion. The right to secrecy concerns the right to prevent the disclosure of personal information to others. In contrast, the right to seclusion involves the means, manner, and method of communication in a location or at a time which disturbs the recipient’s seclusion. Yahoo! was sued for violating the Telephone Consumer Protection Act (TCPA). The TCPA precludes robotexts, and other acts that violate a consumer’s right of seclusion.

The Court looked at the CGL policy issued by National Union to Yahoo! and determined that, in fact, whether Coverage B included coverage for the right-of-seclusion violations in the TCPA class action lawsuits was ambiguous. Therefore, the Court held that the CGL policy could afford coverage for right of seclusion violations under California law, as long as such was consistent with the objectively reasonable expectations of the insured.

What To Watch for Next

Despite the court ruling on the issue of ambiguity, there are still questions about Yahoo!’s reasonable expectations—questions that could only be resolved through further discovery and litigation. The saga therefore is set to continue. But, in the meantime, the California Supreme Court has both created an important avenue to coverage for lawsuits involving privacy violations, as well as reminding insureds and insurers alike that ambiguity and the insured’s associated expectations are important aspects in many coverage lawsuits. It’s vital to be aware of both the relevant policy language, as well as the potential ambiguities when handling coverage claims. Our team knows what is significant, and we’re here to help.