(Article from Insurance Law Alert, September 2021)
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Affirming a North Dakota district court decision, the Eighth Circuit ruled that a violation of statutes exclusion in a commercial umbrella policy barred coverage for all underlying claims, thereby relieving the insurer of its duty to defend. Rodenburg LLP v. Certain Underwriters at Lloyd’s of London, 2021 WL 3745782 (8th Cir. Aug. 25, 2021).
Rodenburg, a law firm specializing in debt collection, was sued by a claimant after her wages were garnished as a result of mistaken identity. The underlying suit alleged wrongful garnishment, tort claims and violations of the Fair Debt Collection Practices Act (“FDCPA”), which provides protections for a person’s right to privacy in debt collection matters. Rodenburg’s insurer denied coverage and in ensuing litigation, the district court ruled that a violation of statutes exclusion precluded coverage. The Eighth Circuit affirmed.
The exclusion barred coverage for:
Any liability arising directly or indirectly out of any action or omission that violates or is alleged to violate: (a) The Telephone Consumer Protection Act, . . . ; (b) The CAN-SPAM Act of 2003, . . .; or (c) Any statute, ordinance or regulation . . . that prohibits or limits the sending, transmitting, communicating or distribution of material or information.
The Eighth Circuit concluded that alleged violations of the FDCPA fall squarely within this language, rejecting Rodenburg’s contention that the FDCPA does not limit communication in the same way that the TCPA and CAN-SPAM Act do. The court also rejected Rodenburg’s assertion that even if the exclusion barred coverage for the alleged FDCPA violations, it did not apply to intentional tort claims, alleging invasion of privacy, defamation and malicious prosecution. Citing the broad exclusionary language, the court held that all of the alleged injuries, including those sounding in tort, originated from the FDCPA-violating conduct and were thus excluded from coverage.