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

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 Demberger is the content strategist at Risk & Insurance®. She can be reached at [email protected]

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The R&I Editorial Team can be reached at [email protected]