The Law

Policy Wording Puts Insurer on the Hook for Insured’s TCPA Violation

U.S. Bus Charter & Limo Inc. sent advertisement text messages to potential customers, violating TCPA laws. Now, its insurer faces $50 million in settlement fees.
By: | June 1, 2018 • 2 min read

U.S. Bus Charter & Limo Inc. (U.S. Coachways) decided to use the power of technology to communicate with potential customers. It sent text messages promoting deals on both bus and limousine rentals, in hopes of sparking business.


Unfortunately, the recipients of these texts found them to be in violation of the Telephone Consumer Protection Act (TCPA), which restricts solicitations like telemarketing and the use of automated telephone equipment. The recipients filed a class action suit against U.S. Coachways.

During the period the messages were sent, from December 2013 through April 2014, the rental service held a professional liability policy with Illinois Union Insurance Company.

U.S. Coachways notified its insurer of the class action, seeking indemnification under the policy. Illinois Union denied coverage, stating its policy did not cover TCPA wrongdoings.

Meanwhile, U.S. Coachways agreed to a settlement of nearly $50 million after the judge determined the messages were in violation of the TCPA.

As part of the agreement, U.S. Coachways assigned the class its right to challenge Illinois Union’s denial of coverage.

Illinois Union was proactive in its defense, suing both the class and U.S. Coachways and seeking a declaration its policy didn’t cover the settlement. James Bull, a named person in the class action, motioned for partial summary judgment.

In court, the policy was under scrutiny. A clause called the “Travel Agency Operations” provision stated advertisements “necessary or incidental to the conduct of travel agency business” as “attempted procurement for a fee or commission of travel, lodging or guided tour accommodations” were covered.

Illinois Union argued that, while the policy may state such ads were covered, the texts U.S. Coachways used were not “for others” or “for a fee.” The court didn’t budge. It concluded the policy covered TCPA violations. Bull’s motion for partial summary judgment was granted.

Scorecard: The policy language, while not explicitly covering or excluding TCPA violations, was found to say in as many words it did cover TCPA violations. Illinois Union is responsible for the underlying suit.

Takeaway: Vague or non-specific policy language can leave an insurer scrambling. It’s best to name any exclusions within the policy so that there is no ambiguity or confusion on the insured’s side. &

Autumn Heisler is the digital producer and a staff writer at Risk & Insurance®. She can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Black Swans

Black Swans: Yes, It Can Happen Here

In this year's Black Swan coverage, we focus on two events: An Atlantic mega-tsunami which would wipe out the East Coast and a killer global pandemic.
By: | July 30, 2018 • 2 min read

One of the most difficult phrases to digest without becoming frustrated or judgmental is the oft-repeated, “I never thought that could happen here.”


Most painfully, we hear it time and time again in the aftermath of the mass school shootings that terrorize this country. Shocked parents and neighbors, viewing the carnage, voice that they can’t believe this happened in their neighborhood.

Not to be mean, but why couldn’t it happen in your neighborhood?

So it is with Black Swans, a phrase describing unforeseen events, made famous by the former trader and acerbic critic of academia Nassim Nicholas Taleb.

We at Risk & Insurance® define these events in insurance terms by saying that they are highly infrequent, yet could cause massive damages. This year, for our annual Black Swan issue, we present two very different scenarios, both of which would leave mass devastation in their wake.

A Mega-Tsunami Is Coming; Can the East Coast Even Prepare?, written by staff writer Autumn Heisler, profiles an Atlantic mega-tsunami, which would wipe out lives and commerce along the East Coast.

On the topic of whether the volcanic island of La Palma, the most northwestern of the Canary Islands, could erupt, split and trigger an Atlantic mega-tsunami, scientists are divided.

Researchers Steven Ward, a geophysicist at UC Santa Cruz, and Simon Day of University College London, say such a thing could happen. Other scientists say Day and Ward are dead wrong; it’s an impossibility.

One of the counter-arguments is backed up by the statement that there has never been an Atlantic mega-tsunami. It’s never happened before and thus, could never happen here. See exhibit “A” above, re: mass school shootings.

Viral Fear: How a Global Pandemic Kills an Economy, written by associate editor Katie Dwyer, depicts a killer global pandemic the likes of which hasn’t been seen in a century.

Tens of millions of people died during the Spanish Flu outbreak of 1918.

Why it could happen again includes the fact that it’s happened before. The science on influenzas, which are constantly mutating, also supports just how dangerous a threat they pose to millions of people beyond the reach of antibiotics.

Should a mutating avian flu, for example, spread widely, we could see a 10 percent drop in GDP, mostly from non-physical business interruption.

As always here, the purpose is to do exactly what insurance modelers and underwriters do; no matter how massive the event, we create scenarios, quantify possible losses and discuss risk mitigation strategies. &

Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at [email protected]