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(Article from Insurance Law Alert, October 2015)

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The Third Circuit ruled that insurers had no duty to defend underlying suits alleging violations of state statutes and common law privacy rights based on the collection of personal ZIP code information in connection with credit card purchases.  OneBeacon America Ins. Co. v. Urban Outfitters, Inc., 2015 WL 5333845 (3d Cir. Sept. 15, 2015).

The policyholders sought Personal and Advertising Injury coverage under liability and umbrella policies for three class action complaints.  Each complaint alleged that the policyholders violated statutory and common law by collecting customers’ ZIP code information for marketing and pecuniary benefit.  However, each complaint included different factual allegations as to the policyholders’ use of the information.  A Pennsylvania federal district court ruled that the insurers had no duty to defend or indemnify any of the suits.  OneBeacon America Ins. Co. v. Urban Outfitters, Inc.,21 F. Supp.3d 426 (E.D. Pa. 2014) (discussed in June 2014 Alert).  The Third Circuit affirmed.

First, the Third Circuit held that the collection of personal information for a company’s own pecuniary interests does not constitute “publication” for purposes of Personal and Advertising Injury coverage.  Although the policies did not define “publication,” the court held that the term was unambiguous and that Pennsylvania law generally requires dissemination to the public in order to establish publication.  Therefore, the policyholders’ use of personal ZIP code information for internal business-related purposes did not constitute publication.  Second, the court held that even where publication to third parties is alleged, a policy exclusion for claims alleging privacy-related statutory violations precluded coverage.  Finally, the court held that where policyholders allegedly used the ZIP code information to send unsolicited advertisements, there was no violation of privacy (as required by the advertising injury provision) under Pennsylvania law.  The court cited to fax blasting coverage cases, noting that Pennsylvania courts have held that the right to privacy referenced in Personal and Advertising Injury provisions does not encompass the right to seclusion and is instead limited to the protection of secrecy interests.