Insurance Coverage for Sending Unsolicited "Junk" Faxes
The Fourth Circuit Court of Appeals’ recent decision in Resource Bankshares Corp. v. St. Paul Mercury Ins. Co. provides two good examples of the Court interpreting insurance policy provisions using classic contract principles. The case is a declaratory judgment action seeking a determination that sending unsolicited “junk faxes” in violation of federal law is covered by the insured’s general commercial liability policy.
First, the Court of Appeals was called upon to interpret the word “accident,” an undefined term in the policy. The insured pointed to a line of cases which construed “accident” to include situations where the insured engaged in intentional conduct due to a mistake of fact. The insured acknowledged that it intended to send the faxes, but did not mean to send them to recipients who did not want the fax. The Court of Appeals rejected the argument because the definition of "unsolicited" under the law means "without prior written consent."
Second, the Court looked to whether the “junk faxes” claim was covered under the policy as “making known to any person or organization written or spoken material that violates a person’s right to privacy." The Court acknowledged that ambiguities in insurance policies are to be construed in favor of the insured and against the insurer. However, the Court of Appeals drew a distinction between right to privacy against the disclosure of private or secret matters, and right to privacy to be secluded against pestering individuals. Although the two meanings of privacy might be ambiguous, the Court applied another contract interpretation maxim: do not read statements in a vacuum. In context of larger document, the Court determined it clear that the policy was not intended to cover the activity.