Resource Bankshares Corporation; Resource Bank v. St. Paul Mercury Insurance Company

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
 RESOURCE BANKSHARES CORPORATION;
RESOURCE BANK,
Plaintiffs-Appellees,
v.
ST. PAUL MERCURY INSURANCE
COMPANY,
Defendant-Appellant. No. 04-1946 
AMERICAN CASUALTY COMPANY OF
READING, PENNSYLVANIA; ERIE
INSURANCE COMPANY; FEDERAL
INSURANCE CORPORATION; GREAT
NORTHERN INSURANCE COMPANY,
Amici Supporting Appellant. 

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 RESOURCE BANKSHARES CORPORATION;
RESOURCE BANK,
Plaintiffs-Appellants,
v.
ST. PAUL MERCURY INSURANCE
COMPANY,
Defendant-Appellee. No. 04-1962 
AMERICAN CASUALTY COMPANY OF
READING, PENNSYLVANIA; ERIE
INSURANCE COMPANY; FEDERAL
INSURANCE CORPORATION; GREAT
NORTHERN INSURANCE COMPANY,
Amici Supporting Appellee. 
Appeals from the United States District Court
for the Eastern District of Virginia, at Norfolk.
Henry Coke Morgan, Jr., Senior District Judge.
(CA-03-764)
Argued: March 17, 2005
Decided: May 11, 2005
Before KING and GREGORY, Circuit Judges,
and HAMILTON, Senior Circuit Judge.
Affirmed in part and reversed in part by published opinion. Judge
Gregory wrote the opinion, in which Judge King and Senior Judge
Hamilton joined.
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COUNSEL
ARGUED: Charles E. Spevacek, MEAGHER & GEER, P.L.L.P.,
Minneapolis, Minnesota, for St. Paul Mercury Insurance Company.
William Edgar Spivey, KAUFMAN & CANOLES, Norfolk, Virginia,
for Resource Bankshares Corporation and Resource Bank. ON
BRIEF: Alan B. Rashkind, FURNISS, DAVIS, RASHKIND AND
SAUNDERS, P.C., Norfolk, Virginia, for St. Paul Mercury Insurance
Company. R. Johan Conrod, Jr., KAUFMAN & CANOLES, Norfolk,
Virginia, for Resource Bankshares Corporation and Resource Bank.
Andrew Butz, William H. White, Jr., BONNER KIERNAN TRE-
BACH & CROCIATA, Washington, D.C., for Amicus Curiae Ameri-
can Casualty Company of Reading, PA, Supporting St. Paul Mercury
Insurance Company. Vernon Priddy, III, SANDS, ANDERSON,
MARKS & MILLER, Richmond, Virginia; Daniel J. Cunningham,
Kathleen A. Sweitzer, TRESSLER, SODERSTROM, MALONEY &
PRIESS, Chicago, Illinois, for Amici Curiae Erie Insurance Com-
pany, Federal Insurance Company, and Great Northern Insurance
Company, Supporting St. Paul Mercury Insurance Company.
OPINION
GREGORY, Circuit Judge:
On March 8, 2002, Cohen & Malad, LLP, an Indiana limited part-
nership, sued Resource Bankshares Corporation and Resource Bank
("Resource") in Indiana state court on behalf of a class of recipients
of Resource’s faxes. The lawsuit was based on the private right of
action provided by the Telephone Consumer Protection Act, 47
U.S.C. § 227 (2003) ("TCPA"). During the times relevant to the law-
suit, Resource had a series of materially identical one-year general
commercial liability insurance policies with St. Paul Mercury Insur-
ance Company ("St. Paul"). Resource sought a declaration in the
United States District Court for the Eastern District of Virginia that
the class-action suit triggered coverage under two separate provisions
of the policies. On cross-motions for summary judgment, the district
court found that one of the two provisions mandated a duty to defend.
We hold that the policies do not compel St. Paul to defend Resource
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for the class-action suit, and thus affirm in part and reverse in part the
decision of the district court.
I.
The TCPA prohibits, among other things like the use of certain
automated telephone equipment for telemarketing, the use of "any
telephone facsimile machine, computer, or other device to send an
unsolicited advertisement to a telephone facsimile machine." Id.
§ 227(b)(1)(C). Section 227(b)(3) creates a private right of action so
recipients of such faxes can sue the senders. It provides that:
(1) A person or entity may, if otherwise permitted by the
laws or rules of court of a State, bring in an appropriate
court of that State1
(A) an action based on a violation of this subsection or the
regulations prescribed under this subsection to enjoin such
violation,
(B) an action to recover for actual monetary loss from such
a violation, or to receive $500 in damages for each such vio-
lation, whichever is greater, or
(C) both such actions.
If the court finds that the defendant willfully or knowingly
violated this subsection or the regulations prescribed under
this subsection, the court may, in its discretion, increase the
amount of the award to an amount equal to not more than
3 times the amount available under subparagraph (B) of this
paragraph.
Id.
1We have previously interpreted this portion of the statute to mean that
state courts have exclusive jurisdiction for private TCPA actions. See
Int’l Sci. & Tech. Inst., Inc. v. Inacom Corp., Inc., 106 F.3d 1146 (4th
Cir. 1997).
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The Indiana class-action complaint alleged that Resource violated
the TCPA by engaging in the mass transmission of unsolicited fax
advertisements over a period of four years to an unknown class of
recipients, numbering at least 40. Consistent with the straightforward
and content-free nature of the TCPA, beyond simply noting that the
faxes were advertisements, the class-action complaint never claimed
that the faxes’ content injured anyone (by, for example, claiming that
the fax libeled them, divulged a trade secret, or infringed on a trade-
mark). Rather, the complaint indicated that the mere receipt of the ads
was harmful.2
The insurance policies at issue, written in admirably plain English,
contain two relevant provisions: one describing the coverage for
"property damage" caused by an "event" and one for damages result-
ing from an "advertising injury offense." The property-damage provi-
sion states that St. Paul will "pay amounts any protected person is
legally required to pay as damages for covered bodily injury or prop-
erty damage," J.A. 41, and explains that:
Property damage means:
• physical damage to tangible property of others, including
all resulting loss of use of that property; or
2In this regard, the complaint stated:
3. . . . With regard to fax advertising in particular, the United
States Congress recognized that the proliferation of facsimile
machines had been accompanied by explosive growth in unsolic-
ited facsimile advertising, or ‘junk faxes.’
4. Congress further noted that fax advertisers took advantage of
fax machines by sending advertisements to available fax num-
bers, knowing the fax would be received and printed by the
recipient’s machine. Congress found this practice problematic
for two (2) reasons: (i) it shifts some of the costs of advertising
from the sender to the recipient; and (ii) it occupies the recipi-
ent’s facsimile machine so that it is unavailable for legitimate
business messages while processing and printing the junk faxes.
J.A. 14-15.
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• loss of use of tangible property of others that isn’t physi-
cally damaged.
J.A. 42. To trigger coverage under this provision, any property dam-
age must flow from an "event," which the policies define as "an acci-
dent, including continuous or repeated exposure to substantially the
same general harmful conditions." J.A. 42 (emphasis added).
As for the "advertising injury" provision, the policies state that:
We’ll pay amounts any protected person is legally required
to pay as damages for covered advertising injury that:
• results from the advertising of your products, work, or
completed work; and
• is caused by an advertising injury offense committed
while this agreement is in effect.
J.A. 43. The limitation to "advertising injury offense" means that cov-
erage extends only to damages arising from the following offenses:
• Libel or slander.
• Making known to any person or organization written or
spoken material that disparages the products, work, or
completed work of others.
• Making known to any person or organization written or
spoken material that violates a person’s right of privacy.
• Unauthorized use of any advertising idea, material, slo-
gan, style, or title of others in your advertising.
J.A. 43 (emphasis added). The third-listed offense — "making known
to any person or organization written or spoken material that violates
a person’s right of privacy" — is chiefly at issue here.
Resource notified St. Paul of the suit and claimed coverage, which,
on June 4, 2002, St. Paul denied. On August 7, 2002, a district court
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in North Carolina issued an opinion styled Prime TV, LLC v. Travel-
ers Ins. Co., 223 F. Supp. 2d 744 (M.D.N.C. 2002). Prime TV held
that, under North Carolina law, both the "property damage" and "ad-
vertising injury" sections of the insurance policy in that case man-
dated coverage for a suit alleging a TCPA violation. In June of the
next year Resource told St. Paul of the Prime TV case and argued that
the policy was materially identical to St. Paul’s. St. Paul again denied
that the policies entitled Resource to coverage. Then, on November
4, 2003, Resource brought this declaratory judgment action. Resource
seeks a declaration that St. Paul must defend, indemnify, and reim-
burse Resource for all costs associated with the class-action litigation.
The parties filed cross-motions for summary judgment. Recogniz-
ing that courts of several other jurisdictions had already held for
insureds seeking coverage for defense of TCPA suits under generally
similar policies,3 the district court held that the "property damage"
provision was inapplicable because Resource’s conduct was not an
"accident," J.A. 81-84, but found that the advertising injury offense
provision applied because the faxes violated the recipient’s "right to
privacy." J.A. 74-80. Both parties appeal the judgments unfavorable
to them.
II.
We review de novo a grant of summary judgment, Seabulk Off-
shore, Ltd. v. Am. Home Assurance Co., 377 F.3d 408, 419 (4th Cir.
3See Park Univ. Enter., Inc. v. Am Cas. Co. of Reading, PA, 314 F.
Supp. 2d 1094 (D. Kan. Apr. 15, 2004); Registry Dallas Assocs. v. Wau-
sau Bus. Ins. Co., 2004 WL 614836 (N.D. Tex. Feb. 26, 2004); Univer-
sal Underwriters Ins. Co. v. Lou Fusz Auto. Network, Inc., 300 F. Supp.
2d 888 (E.D. Mo. 2004), aff’d, 401 F.3d 876 (8th Cir. 2005); Am. States
Ins. Co. v. Capital Assocs. of Jackson County, Inc., 2003 WL 23278656
(S.D.Ill. Dec. 9, 2003) (advertising injury provision mandates coverage),
rev’d, 392 F.3d 939 (7th Cir. 2004); Hooters of Augusta, Inc. v. Am.
Global Ins. Co., 272 F. Supp. 2d 1365 (S.D. Ga. 2003); W. Rim Inv.
Advisors, Inc. v. Gulf Ins. Co., 269 F. Supp. 2d 836 (N.D. Tex. 2003);
Prime TV, 223 F. Supp. 2d 744; TIG Ins. Co. v. Dallas Basketball, Ltd.,
129 S.W.3d 232 (Tx. Ct. App. Feb. 11, 2004); Merchant’s & Business-
men’s Mut. Ins. Co. v. A.P.O. Health Co., Inc., 228 N.Y. L.J. 22 (N.Y.
Sup. Ct. Aug. 29, 2002).
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2004), which is to be given when no genuine issue of material fact
remains for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-
48 (1986). Summary judgment is proper "[u]nless there is sufficient
evidence favoring the nonmoving party for a jury to return a verdict
for that party. If the evidence is merely colorable, or is not signifi-
cantly probative, summary judgment may be granted." Id. at 249
(citations omitted).
A federal court hearing a diversity claim must apply the choice-of-
law rules of the state in which it sits. Klaxon Co. v. Stentor Elec. Mfg.
Co., 313 U.S. 487, 496-97 (1941); Am. Online, Inc. v. St. Paul Mer-
cury Ins. Co., 347 F.3d 89, 92 (4th Cir. 2003). This appeal arises from
a complaint filed in the Eastern District of Virginia, so we look to
Virginia’s choice-of-law rules. "Under Virginia law, a contract is
made when the last act to complete it is performed, and in the context
of an insurance policy, the last act is the delivery of the policy to the
insured." Seabulk Offshore, 377 F.3d at 419; Buchanan v. Doe, 431
S.E.2d 289, 291 (Va. 1993) ("generally, the law of the place where
an insurance contract is written and delivered controls issues as to its
coverage."). Since the policies were delivered to Resource in Vir-
ginia, the parties correctly agree that Virginia law governs.
"Under Virginia law, an insurer’s obligation to defend an action
‘depends on comparison of the policy language with the underlying
complaint to determine whether the claims alleged [in the complaint]
are covered by the policy.’" Am. Online, 347 F.3d at 93 (quoting
Superperformance Int’l, Inc. v. Hartford Cas. Ins. Co., 332 F.3d 215,
220 (4th Cir. 2003)); see Erie Ins. Exch. v. State Farm Mut. Auto Ins.
Co., 60 Va. Cir. 418, 423 (Va. Cir. Ct. 2002) (courts apply the "eight
corners rule," comparing the four corners of the policy with the four
corners of the complaint). A policyholder bears the burden of proving
that the policyholder’s conduct is covered by the policy. See Furrow
v. State Farm Mut. Auto. Ins. Co., 375 S.E.2d 738, 740 (Va. 1989)
(citing Md. Cas. Co. v. Cole, 158 S.E. 873, 876 (Va. 1931)). Yet this
burden is not especially onerous since the insurer must defend unless
"it clearly appears from the initial pleading the insurer would not be
liable under the policy contract for any judgment based upon the alle-
gations." Reisen v. Aetna Life and Cas. Co., 302 S.E.2d 529, 531 (Va.
1983) (citing Travelers Indem. Co. v. Obenshain, 245 S.E.2d 247, 249
(1978)). The duty to defend is broader than the duty to indemnify
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because it "arises whenever the complaint alleges facts and circum-
stances, some of which, if proved, would fall within the risk covered
by the policy." Brenner v. Lawyers Title Ins. Corp., 397 S.E.2d 100,
102 (Va. 1990); Reisen, 302 S.E.2d at 531. "However, if it appears
clearly that the insurer would not be liable under its contract for any
judgment based upon the allegations, ‘it has no duty even to defend.’"
Brenner at 102 (quoting Obenshain, 245 S.E.2d at 249).
In Virginia "an insurance policy is a contract to be construed in
accordance with the principles applicable to all contracts." Seabulk
Offshore, Ltd., 377 F.3d at 419 (citing Graphic Arts Mut. Ins. Co. v.
C.W. Warthen Co., 397 S.E.2d 876, 877 (Va. 1990)). As with other
contracts, when interpreting a policy courts must not strain to find
ambiguities, see, e.g., Salzi v. Virginia Farm Bureau Mut. Ins. Co.,
556 S.E.2d 758, 760 (Va. 2002) ("‘[A]s in the case of any other con-
tract, the words used are given their ordinary and customary meaning
when they are susceptible of such construction.’") (quoting Graphic
Arts, 397 S.E.2d at 877), or examine certain specific words or provi-
sions in a vacuum, apart from the policy as a whole. See, e.g., TM
Delmarva Power, L.L.C. v. NCP of Va., L.L.C., 557 S.E.2d 199 (Va.
2002); First Am. Title Ins. Co. v. Seaboard Sav. & Loan Ass’n, 315
S.E.2d 842, 845 (Va. 1984). A policy provision is ambiguous when,
in context, it is capable of more than one reasonable meaning. See
Caldwell v. Transp. Ins. Co., 364 S.E.2d 1, 3 (Va. 1988) (citing St.
Paul Ins. v. Nusbaum & Co., 316 S.E.2d 734 (Va. 1984)).
Because insurance companies typically draft their policies without
the input of the insured, the companies bear the burden of making
their contracts clear. Accordingly, if an ambiguity exists, it must be
construed against the insurer. See, e.g., Craig v. Dye, 526 S.E.2d 9
(Va. 2000); First Am. Title Ins. Co., 364 S.E.2d at 3; Ocean Accident
& Guar. Corp. v. Washington Brick & Terra Cotta Co., 139 S.E. 513,
517 (Va. 1927) ("It is a well recognized rule that insurance policies,
in case of doubt, should be construed most strongly against the
insurer. But this does not authorize the court to make a new contract
for the parties, nor to adopt a construction not justified by the lan-
guage or intent of the parties.").
III.
For the following reasons, we hold that neither the "property dam-
age" nor the "advertising injury" provision covers the class-action
lawsuit. St. Paul thus owes Resource no duty to defend the suit.
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A.
As the policy language quoted above makes plain, Resource is enti-
tled to coverage for "property damage" liability only for actions that
are reasonably termed an "accident."4 What can be called an "acci-
dent" has, at times, been a puzzling question.5 Yet often, as here, the
answer is clear enough.
To decide whether something is an accident under an insurance
policy, Virginia courts ask whether an event was a natural and proba-
ble consequence of the insured’s intended actions. Under this formu-
lation, an accident "is an event which creates an effect which is not
the natural or probable consequence of the means employed and is not
intended, designed, or reasonably anticipated." Lynchburg Foundry
Co. v. Irvin, 16 S.E.2d 646, 648 (1941); see also Citizens Home Ins.
Co., Inc. v. Nelson, 237 S.E.2d 100, 102 (Va. 1977) (same). Stated
otherwise, the question is whether the incident or injury was a reason-
ably foreseeable result of the insured’s actions. See, e.g., Patch v.
4St. Paul also contends that no "property damage" was ever implicated
by the class-action lawsuit. Because a separate fatal flaw exists in
Resource’s property-damage claim — the fact that sending the faxes was
not an "accident" — the district court did not address this question, and
neither do we.
5As one court wrote,
Everyone knows what an accident is until the word comes up in
court. Then it becomes a mysterious phenomenon, and, in order
to resolve the enigma, witnesses are summoned, experts testify,
lawyers argue, treatises are consulted and even when a conclave
of twelve world-knowledgeable individuals agree as to whether
a certain set of facts made out an accident, the question may not
yet be settled, and it must be reheard in an appellate court.
Brenneman v. St. Paul Fire & Marine Ins. Co., 192 A.2d 745, 747 (Pa.
1963); see also Aetna Ins. Co. v. Carpenter, 196 S.E. 641, 646 (Va.
1938) ("The word ‘accidental’ is not easy to define in specific legal
terms applicable to every case."); see generally Adam F. Scales, Man,
God, and the Serbonian Bog: the Evolution of Accidental Death Insur-
ance, 86 Iowa L. Rev. 173 (2000) (explaining the longstanding difficul-
ties faced in deciding whether a death was "accidental" and proposing a
solution).
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Metro. Life Ins. Co., 733 F.2d 302, 304 (4th Cir. 1984) (noting that
the crucial inquiry in the "natural or probable consequence" test is the
"forseeability of consequences and not intent of the insured"); Utica
Mut. Ins. Co. v. Travelers Indem. Co., 286 S.E.2d 225, 226 (Va.
1982) (accident is an "incident unexpected from the viewpoint of the
insured"; intentional actions are not accidents); Smith v. Combined
Ins. Co. of Am., 120 S.E.2d 267, 268 (Va. 1961) (insured who resisted
arrest, wounded a police officer, and took refuge in a building that
was set on fire by police tear gas bombs was not entitled to benefits
from accidental-death policy because his death was a reasonably fore-
seeable consequence of his actions); Ocean Accident & Guarantee
Corp. v. Glover, 182 S.E. 221, 222 (Va. 1935) (adopting a common-
language dictionary definition of "accident"); Baker v. Va. Employ-
ment Comm’n, 1998 WL 972284 (Va. Cir. Ct. 1998) (an accident "is
a befalling; an event that takes place without one’s foresight or expec-
tation; an undesigned, sudden, and unexpected event; a mishap result-
ing in injury to a person or thing." (citing Derby v. Swift & Co., 49
S.E.2d 417 (Va. 1948)).
Resource does not deny that it intentionally sent advertisements by
fax. Rather, as we understand it, Resource submits the possibility that
it only intended to fax ads to recipients who actually wanted them,
and only did otherwise inadvertently. In other words, Resource sug-
gests that it could not foresee that the faxes were unsolicited. In sup-
port of the claim that a TCPA violation could be an accident,
Resource cites Park University Enterprises, Inc. v. American Casu-
alty Co. of Reading, PA, 314 F.Supp. 2d 1094 (D. Kan. 2004).
Resource also cites several cases from other contexts (although none
from the Virginia Supreme Court) which could all be called "mis-
taken identity means accidental action." These cases basically hold
that various actions which are not necessarily injurious when consent
exists can be an accident under insurance law when they are mis-
takenly performed on an unconsenting party. See, e.g., York Indus.
Ctr., Inc. v. Mich. Mut. Liab. Co., 155 S.E.2d 501 (N.C. 1967) (under
North Carolina law, insured who intentionally cut down a neighbor’s
trees in the mistaken belief that they were on the insured’s property
was covered by accident insurance); Erie Ins. Exchange v. Sipos, 64
Va. Cir. 55 (Va. Cir. Ct. 2004) (insured who disposed of property
from an apartment under the mistaken belief that it was unwanted
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debris when it really belonged to a new tenant was entitled to cover-
age because action was an accident).6
Resource’s "accidental fax" argument does not persuade us. The
TCPA prohibits all unsolicited advertisements sent by fax. Specifi-
cally, the TCPA defines the term by noting that "[t]he term ‘unsolic-
ited advertisement’ means 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 invita-
tion or permission." 47 U.S.C. § 227(a)(4) (2003) (emphasis added).
Here lies the problem: Resource has offered precisely no evidence
that would cause a reasonable person to mistakenly believe that they
had received prior express consent to send their fax ads.
Without such evidence, Resource cannot begin to carry its burden,
see Furrow, 375 S.E.2d at 740, of establishing that its conduct poten-
tially merits coverage, even though at this stage in the proceedings all
that it needs to prove is that a reasonable jury could find as much, see
Anderson v. Liberty Lobby, 477 U.S. at 249 ("there is no issue for trial
unless there is sufficient evidence favoring the nonmoving party for
a jury to return a verdict for that party." (citations omitted)). As
Anderson explained, "a party opposing a properly supported motion
for summary judgment ‘may not rest upon the mere allegations or
denials of his pleading, but . . . must set forth specific facts showing
that there is a genuine issue for trial.’" Id. at 248 (quoting Fed. R. Civ.
P. 56(e)) (emphasis added). Thus, while Resource disputes the for-
seeability of its consequences, this dispute is not a genuine one under
6Resource also claims a case from this court, Atlantic Permanent Fed-
eral Savings & Loan Association v. American Casualty Co., 839 F.2d
212 (4th Cir. 1998), for the proposition that "Virginia courts have never
extended the ‘intentional wrongdoing’ defense to conduct which, though
itself ‘intentional,’ was not intended to cause injury." Id. at 217. We
pause to note Atlantic Permanent’s inapplicability to this context. This
quote is plucked from a section dealing with an argument regarding
whether Virginia’s public policy prohibited issuing insurance policies for
actions which, while intentionally done, were not intended to cause
injury. See id. That we earlier noted that Virginia law did not affirma-
tively make such actions uninsurable is entirely different from saying
that this type of policy — one covering accidents — actually covers the
conduct at issue in this case.
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the summary judgment standards and, unlike Universal Underwriters,
401 F.3d at 882, the forseeability of Resource’s conduct is not "an
open factual question," id. Because Resource plainly (1) intended to
transmit the faxes to someone, and (2) fails to present evidence that
could reasonably be mistaken as express permission to send these
faxes, we can only conclude that the sending was not accidental. It is
obvious to anyone familiar with a modern office that receipt is a "nat-
ural or probable consequence" of sending a fax, and receipt alone
occasions the very property damage the TCPA was written to address:
depletion of the recipient’s time, toner, and paper, and occupation of
the fax machine and phone line. In this way we fully agree with the
Seventh Circuit’s opinion on this issue in American States Ins. Co.,
392 F.3d 939, 943 (7th Cir. 2004), which explained that:
junk faxes use up the recipient’s ink and paper, but senders
anticipate that consequence. Senders may be uncertain
whether particular faxes violate § 227(b)(1)(C) but all send-
ers know exactly how faxes deplete recipients’ consumables
. . . . Because every junk fax invades the recipient’s property
interest in consumables, this normal outcome is not covered.
Id.; see also W. Rim Inv. Advisors, Inc. v. Gulf Ins. Co., 269 F. Supp.
2d 836 (N.D. Tex. 2003). Accordingly, we affirm the district court’s
grant of summary judgment to St. Paul on the "property damage" pro-
vision.
B.
Resource’s other claim is based exclusively on the third prong of
the advertising-injury offense part of the policies: "making known to
any person or organization written or spoken material that violates a
person’s right to privacy." J.A. 43.
We first note that neither the class-action complaint nor the
TCPA’s private right of action ever actually mentions the word "pri-
vacy." See J.A. 14-19. Rather, the district court held that the com-
plaint implied an allegation of a right-to-privacy violation.7 We can
7St. Paul argues that since the complaint did not explicitly allege a vio-
lation of the right to privacy — indeed, that the word "privacy" was
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grant to Resource that the harm occasioned by unsolicited faxes
involves protection of some sort of "privacy." Junk faxes cause some
economic damage (each instance may be small but is nonetheless real,
and the amount becomes especially serious when aggregated) and
what might be called some kind of harm to privacy (in the same sense
that certain nuisances invade privacy). The TCPA’s private right of
action obviously meant to remedy and prevent these twin harms, so
the class-action complaint could imply some sort of "privacy" concern.8
But the word privacy carries different meanings in different contexts,9
nowhere mentioned within the four corners of the complaint — this
should end the case. This may or may not be right, but because we are
not certain that the Virginia Supreme Court would categorically rule out
a claim that was not explicit if it was somehow implicit in the text and
because the matter can be resolved on another perfectly good reason, we
refrain from deciding the matter and thus assume arguendo that an
implied privacy allegation could be sufficient.
8We do not, however, grant this based on Resource’s citation of our
decision in International Science & Technology Institute, Inc., 106 F.3d
1146 (4th Cir. 1997). That decision contained dictum stating that "[t]he
TCPA was enacted to protect the privacy interests of residential tele-
phone subscribers by placing restrictions on unsolicited, automated tele-
phone calls to the home and to facilitate interstate commerce by
restricting certain uses of facsimile (fax) machines and automatic
dialers." Id. at 1150 (citing S.Rep. No. 102-178, at 1 (1991)). Resource
claims that this helps to prove their point that the private right of action
was passed to protect "privacy," and this citation is typical of their legis-
lative history argument.
We pause to clarify International Science & Technology Institute’s
application in this case. Besides being pure dictum, it does not aid
Resource’s argument because, if anything, it only indicates that the
TCPA had two broad reasons for being: (1) privacy for home-phone
users, and (2) facilitation of interstate commerce for fax users. But, as we
explain, St. Paul cannot get off so easily either: interstate commerce can
surely be facilitated by some species of the genus "privacy" — here, the
seclusion species. See Prosser, infra n.10. This simply means that we
must decide whether St. Paul’s policies protect liability arising from vio-
lations of "seclusion" privacy. See American States, 392 F.3d at 942.
9This is no new revelation. The path-breaking scholarship on "privacy"
in the law was written well over a hundred years ago by Samuel D. War-
ren and Justice Brandeis, see The Right to Privacy, 4 Harv. L. Rev. 193
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and if any overlap exists between the complaint’s "implied privacy"
and the policies’ explicit use of the word it is only nominal (both in
the sense that it is in name only and that it is trivial). But, contrary
to Resource’s contentions, this nominal overlap does not necessarily
result in ambiguity. Every word in this sentence contains different
meanings, but all read clearly in context.
The real question, then, is whether, when read in context, a reason-
able purchaser of insurance would believe that the sort of privacy
interests protected by the policies overlap with the sort of privacy
with which the TCPA is concerned. See American States, 392 F.3d at
942 ("To say, as the district court did, that § 227(b)(1)(C) protects pri-
vacy, and then stop the analysis, is to avoid the central question in the
case: whether the policies cover the sort of seclusion interests affected
by faxed ads."). In American States the Seventh Circuit adeptly ana-
lyzed the two types of "privacy" really at issue in insurance coverage
disputes for TCPA lawsuits. We approve of its analysis, and hold that
the St. Paul policies do not cover the sorts of privacy invasions envi-
sioned by the TCPA’s unsolicited fax prohibition. As Judge Easter-
brook explained:
"Privacy" is a word with many connotations. The two prin-
cipal meanings are secrecy and seclusion, each of which has
(1890) (collecting cases in which relief had been afforded on the basis
of, e.g., defamation, a breach of confidence, or the invasion of some
property right and grouping them together as a "right to privacy"). These
disparate strands were carefully teased out, defined, and clarified by
Dean Prosser some 45 years ago. See William L. Prosser, Privacy, 48
Cal. L. Rev. 383 (1960). Prosser found four separate privacy-related
torts: "1. Intrusion on the plaintiff’s seclusion or solitude, or into his pri-
vate affairs. 2. Public disclosure of embarrassing private facts about the
plaintiff. 3. Publicity which places the plaintiff in a false light in the pub-
lic eye. 4. Appropriation, for the defendant’s advantage, of the plaintiff’s
name or likeness." Id. at 389. For a more recent treatment, see, e.g., Jerry
Kang, Privacy in Cyberspace, 50 Stan. L. Rev. 1193, 1202-04 (1998)
(finding three distinct categories of privacy interests: (1) physical space,
such as that violated by trespass and unwarranted search and seizure; (2)
decisional privacy, as discussed in Roe v. Wade; and (3) informational
privacy, or "control over the processing—i.e., the acquisition, disclosure,
and use—of personal information.").
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multiple shadings. See Restatement (Second) of Torts § 652
(1977); Richard S. Murphy, Property Rights as Personal
Information, 84 Geo. L.J. 2381 (1996). A person who wants
to conceal a criminal conviction, bankruptcy, or love affair
from friends or business relations asserts a claim to privacy
in the sense of secrecy. A person who wants to stop solici-
tors from ringing his doorbell and peddling vacuum cleaners
at 9 p.m. asserts a claim to privacy in the sense of seclusion.
Some other uses of the word "privacy" combine these
senses: for example, a claim of a right to engage in consen-
sual sexual relations with a person of the same sex, or to
abort an unwanted pregnancy, has both informational
(secrecy) and locational (seclusion) components, with an
overlay of substance (the objection to governmental regula-
tion).
American States, 392 F.3d at 941. This passage puts words to the gut
instinct one feels when comparing the class-action complaint with St.
Paul’s policies: if the class-action complaint alleges any violation of
privacy, it is "seclusion" privacy. It is concerned with the manner of
the advertisement. In contrast, the advertising-injury offense part of
the policies is exclusively concerned with those types of privacy, see
Prosser, supra n.9, which, like secrecy, are implicated by content of
the advertisements.
Consider closely the text and context of the operative sentence. It
states that coverage exists for advertisements "making known to any
person or organization written or spoken material that violates a per-
son’s right to privacy." J.A. 43 (emphasis added). It requires undue
strain to believe that sending an unsolicited fax ad that has no private
information or content (but rather simply advertised fairly the send-
er’s wares) can reasonably be said to "mak[e] known" material that
violates a person’s10 right to privacy. It surely seems to us that the
10St. Paul also makes the argument that "person" here means "human"
person, not "legal" person or "organization" (which would include a
LLP). St. Paul Br. at 29-34. St. Paul puts too fine a point on things here.
But more fundamentally, as Resource argues, since this is a class-action
complaint with unnamed parties, it is fair to assume that at least some of
class members could be "persons" even in the restrictive sense that St.
Paul suggests.
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plainest and most common reading of the phrase indicates that "mak-
ing known" implies telling, sharing or otherwise divulging, such that
the injured party is the one whose private material is made known, not
the one to whom the material is made known.
But this alone is not the key to the case; applying the commonsense
canon of construction compelling courts to look to the immediate con-
text of a word or phrase for interpretive guidance gets to the heart of
the matter. As noted above, the policies promise to pay for damages
from injuries arising from:
• Libel or slander
• Making known to any person or organization written or
spoken material that disparages the products, work, or
completed work of others.
• Making known to any person or organization written or
spoken material that violates a person’s right to privacy.
• Unauthorized use of any advertising idea, material, slo-
gan, style, or title of others in your advertising.
J.A. 43. First, the meaning of "making known" in the third-listed
offense is also informed by its next-door neighbor, which provides
coverage for making known disparaging material. It is difficult to
imagine how "making known" disparaging material harms the recipi-
ent of the material. Rather, it is clear to us that both of these "making
known" provisions focus on harm to a third party. Moreover, these
four offenses all share the common thread of assuming that the victim
of the advertising injury offense is harmed by the sharing of the con-
tent of the ad, not the mere receipt of the advertisement. See, e.g.,
Select Designs, Ltd. v. Union Mut. Fire Ins. Co., 674 A.2d 798, 802
(Vt. 1996) ("The term ‘advertising injury,’ as . . . construed in an
overwhelming majority of reported cases, is injury to another that
results from the content of statements about the products or services
of the insured.").
But broadly prohibiting junk fax ads has nothing at all to do with
the content of any ads. For example: a single, unsolicited page with
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nothing but a three-word slogan (perhaps "Refinance with Resource"
or "Just Do It") or even a name or an abstract squiggle alone — if it
can be construed as an ad (say, "Nike," or its famous "Swoosh" trade-
mark) — violates the TCPA and triggers the private right of action.
However, a solicited ad that somehow manages to simultaneously
defame, libel, tell trade secrets, and infringe ten trademarks, may
incur lots of legal liability but is in no way prohibited by the TCPA.
In contrast, however, we see quite easily how the TCPA might
facilitate interstate commerce by allowing owners of fax machines
sufficient seclusion to do with their fax-dedicated phone line and fax
machine as they wished without sifting through stacks of unwanted
faxes that deplete their paper and toner. In our view, then, the TCPA’s
unsolicited fax prohibition provides one small bit of sanctuary from
certain solicitations, but does not even hint at protecting anyone from
private facts being divulged through an advertisement (which, of
course, the policies plainly do). Accordingly, the privacy prong of the
advertising injury provision cannot be construed to cover a violation
of the TCPA.
One does not have to look far to find how a policy could have been
written differently in order to secure coverage for TCPA violations.
After oral argument in this case, the Eighth Circuit decided Universal
Underwriters, 401 F.3d 876, which Resource claims aids them. In
Universal Underwriters, the policy at issue promised to pay all dam-
ages arising from, among other things, "private nuisance (except pol-
lution), [and] invasion of rights of privacy . . ." and did not limit or
qualify these terms. Id. at 881. An unwanted fax is a paradigmatic pri-
vate nuisance, and we think the "invasion of rights of privacy" provi-
sion’s proximity to the private nuisance language, but separation from
"advertising injury," surely had to influence the Eighth Circuit’s rea-
soning. Indeed, Universal Underwriters took care to distinguish
American States, 392 F.3d 939, where, like this case, the privacy pro-
vision was embedded in an advertising injury part. See Universal
Underwriters, 401 F.3d at 882-83.
The point is that context matters, and here, like American States
and unlike Universal Underwriters, the context points against cover-
age. We must therefore reverse the ruling of the district court finding
that the privacy clause imposes a duty to defend Resource.
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IV.
To sum up: simply sending a fax is what causes the property dam-
age protected by the TCPA and alleged in the class-action lawsuit,
and Resource presented us with no evidence that it sent its faxes acci-
dentally. It thus cannot avoid summary judgment on the point that the
"property damage" provision provides no coverage for the class-
action lawsuit. Moreover, the TCPA’s unsolicited fax prohibition pro-
tects "seclusion" privacy, for which content is irrelevant. Unfortu-
nately for Resource, it did not buy insurance policies for seclusion
damages; instead, it insured against, among other things, damages
arising from violations of content-based privacy. This reasonable,
non-technical distinction precludes coverage for an "advertising
injury offense."
For the foregoing reasons, we remand to the district court in order
to grant St. Paul’s motions for summary judgment and deny
Resource’s pursuant with this opinion. The judgment of the district
court is thus
AFFIRMED IN PART AND
REVERSED IN PART.
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