The Superior Court of Delaware, New Castle County, ruled that RSUI Indemnity Company owed its insured, Sempris, LLC, a duty to defend and indemnify against an underlying TCPA lawsuit pending in the United States District Court for the Northern District of Illinois. RSUI Indem. Co. v. Sempris, LLC, C.A. No. N13C-10-096, 2014 Del. Super. LEXIS 449 (Sept. 3, 2014).
The coverage dispute arose out of the following circumstances. RSUI issued a D&O liability policy to Sempris effective from March 1, 2013 through March 1, 2014. Sempris is a marketing services company serving retailers, Internet companies, and third-party call centers. A class action TCPA lawsuit was filed in October 2013 against Sempris alleging violations of the TCPA for unsolicited telemarketing phone calls and improper use of automatic telephone dialing systems. Sempris tendered the underlying lawsuit to RSUI during the policy period. RSUI denied coverage and filed its declaratory judgment action against Sempris. The parties filed cross-motions for summary judgment.
Principally, RSUI asserted that the underlying class action was nothing more than an extension of four prior lawsuits filed against Sempris in California, Illinois, and Michigan, all of which were filed before the RSUI policy incepted. Those prior lawsuits asserted causes of action for fraud, negligence, unfair competition, deceptive business practices, unjust enrichment, violation of the Electronic Funds Transfer Act, and breach of contract. Importantly, none of the four prior lawsuits alleged violations of the TCPA. RSUI argued that the policy required that a claim be made during the policy period and because the underlying class action was related to the prior lawsuits, Sempris’ failure to make a claim during the policy period precluded coverage in the first instance. In addition, RSUI argued that the underlying lawsuit was related to the prior lawsuits and constituted a single claim under the policy pursuant to a policy condition which stated that “[a]ll claims based on … the same or related facts … shall be deemed to be a single Claim.” The court rejected RSUI’s arguments.
Relevantly, the four prior lawsuits arose from circumstances where the underlying plaintiffs initiated the contact by placing an outbound call to Sempris or one of Sempris’ vendors. Thereafter, once the plaintiffs had contacted Sempris, it was alleged that Sempris and its vendors improperly enrolled plaintiffs in Sempris Membership Programs. The critical distinction in the underlying TCPA class action was the plaintiffs’ allegations that Sempris initiated contact by improperly making outbound calls using an auto-dialer. Importantly, the class representative was on the National Do Not Call Registry. The court concluded that the allegations in the prior lawsuits did not and would not give rise to a cause of action under the TCPA. The court also rejected RSUI’s other arguments in finding that, for the same reasons above, the prior notice exclusion did not apply.
This case demonstrates the challenges involved in contesting coverage under a claims-made policy based on relatedness.