Publications

(Article from Insurance Law Alert, October 2015)

For more information, please visit the Insurance Law Alert Resource Center.

As reported in our January 2014 Alert, the Connecticut Supreme Court has ruled that  claims arising out of the accidental loss of computer data are not covered by general liability policies if there was no “publication” of the data to a third party.  Recall Total Info. Mgmt., Inc. v. Federal Ins. Co., 2015 WL 2371957 (Conn. May 26, 2015).  Last month, the Seventh Circuit employed similar reasoning and held that a company’s practice of secretly recording customer phone calls for its own purposes did not constitute “publication” under an advertising injury provision.  Defender Security Co. v. First Mercury Ins. Co., 2015 WL 5692516 (7th Cir. Sept. 29, 2015).

A customer sued Defender Security Company, alleging violations of state statutory law based on the company’s practice of recording customer phone calls without permission.  The recordings, which were stored for various business purposes, contained personal information, including customers’ addresses, dates of birth and social security numbers.  First Mercury Insurance Company refused to defend the suit on the basis that it did not allege covered advertising injury.  In particular, First Mercury argued that there was no “publication” of the personal data because the recordings were not released to any third party.  An Indiana federal district court agreed and dismissed Defender’s breach of contract claim against First Mercury.  The Seventh Circuit affirmed.

Although “publication” was not defined in the policy, the Seventh Circuit concluded that the term requires a release of the information by the party holding it.  Because the suit against Defender did not allege that the recordings (or the information contained therein) were shared with or transmitted to any third party, the court held that there was no publication.  In so ruling, the court rejected Defender’s assertion that publication occurred when the material was transmitted to a separate recording device.  Rather, the court analogized the recordings to note-taking during phone calls, explaining that the existence of notes in a filing cabinet would not constitute publication.