In OneBeacon Amer. Ins. Co. v. Urban Outfitters, 2015 WL 5333845 (3d. Cir. Sept. 15, 2015), the United States Court of Appeals for the Third Circuit held that three underlying class action lawsuits filed against Urban Outfitters and Anthropologie, Inc. did not allege “personal and advertising injury.” The Third Circuit held that for Coverage B “oral or written publication, in any manner, of material that violates person’s right of privacy,” (1)“privacy” refers only to the right of secrecy, not the right of seclusion; (2) “publication” requires dissemination of information to the public at large, and (3) “in any manner” does not modify or change the meaning of “publication” to a lesser standard.
In the spirit of full disclosure, I represented OneBeacon America in the litigation with my colleagues at White and Williams LLP. The facts of the matter are straightforward.
Urban Outfitters and Anthropologie (collectively, “Urban Outfitters”) were sued in three separate class actions filed in California, Massachusetts, and the District of Columbia. (The California class action was actually a consolidation of multiple class actions.) In each action, plaintiffs alleged that that Urban Outfitters wrongfully collected and used consumers’ ZIP codes and other data for marketing and purchase-tracking in violation of state statutes and privacy rights. Urban Outfitters sought defense coverage for each lawsuit under “personal and advertising injury,” defined in part as “oral or written publication, in any manner, of material that violations a person’s right of privacy.”
In the first lawsuit, Hancock, the underlying complaint alleged that Urban Outfitters unlawfully collected consumers’ ZIP code information during credit card transactions in violation of District of Columbia statute. Id. at *1. By obtaining the consumers’ ZIP codes, Urban Outfitters was then able to obtain the consumers’ home and business addresses to use for marketing. Id. Urban Outfitters contended the exchange of data between the retailer and the consumers constituted a “publication” for purposes of “personal and advertising injury” coverage. The Third Circuit disagreed and accepted the insurers’ arguments that “‘publication’ requires dissemination to the public.” Id. at *2. The court rejected the contention that the failure to define the term “publication” in the policy made the term ambiguous:
Although neither the policies nor the Pennsylvania Supreme Court have defined “publication,” that does not render the term ambiguous. Rather, “[w]ords of common usage in an insurance policy are to be construed in their natural, plain, and ordinary sense, and we may inform our understanding of these terms by considering their dictionary definitions.” Madison Constr. Co. v. Harleysville Mut. Ins. Co., 735 A.2d 100, 106 (PA. 1999). The District Court cited three separate dictionary definitions of “publication,” all of which support the conclusion that “publication” requires dissemination to the public. [Emphasis added.]
Significantly, the Court also rejected the contention that the phrase “in any manner” changed the meaning of “publication”:
The fact that the policies specify that “publication” may be made “in any manner” does not alter the analysis; as the Eleventh Circuit correctly noted, the phrase “in any manner” “merely expands the categories of publication (such as e-mail, handwritten letters, and, perhaps, ‘blast-faxes’) covered by the [p]olicy,” but “cannot change the plain meaning of the underlying term ‘publication.’” Creative Hosp. Ventures, Inc. v. U.S. Liab. Ins. Co., 444 F. App’x 370, 375 (11th Cir. 2011). [Emphasis added.]
In the second lawsuit, Miller, the underlying complaint alleged that Urban Outfitters unlawfully collected consumers’ ZIP code information to use for marketing purposes, including to send unsolicited promotional materials and “junk mail.” Id. at *3. Noting that the Pennsylvania Superior Court has recognized that the privacy right contemplated in “personal and advertising injury” is the right to secrecy, not the right to seclusion, the Third Circuit concluded that Miller did not allege a violation of a person’s “right of privacy.” Importantly, in reaching its conclusion, the Third Circuit ejected the contention that the consumers had a right of privacy in their ZIP codes, or that the lawsuit alleged violation of consumers’ rights to keep their addresses secret from the retailers:
[T]he factual allegations of the Miller complaint evince a concern with seclusion, and not secrecy. The complaint asserts that plaintiffs “have suffered an injury as a result of Defendant’s unlawful conduct by receiving unsolicited marketing and promotional materials, or ‘junk mail,’ from Defendant.” [Record citation omitted.] Although the complaint asserts that Urban Outfitters did collect plaintiffs’ ZIP code information, that information was collected allegedly “to identify the customer’s address and/or telephone number … to send unsolicited marketing and promotional materials.” . . . Put simply, the complaint does not assert harms based on the plaintiffs’ interests in keeping their ZIP codes secret. Accordingly, it does not allege publication of material that violates a person’s “right to privacy” under the policies . . . .
Id. at *4.
For the final lawsuit, Dremak, the Court held that the Recording and Distribution of Material of Information In Violation of Law exclusion barred coverage, because the lawsuit was brought under California’s Song-Beverly Credit Card Act. Id. at *3. The lawsuit originally had alleged common law claims, but those causes of action were dismissed without prejudice while the coverage litigation was pending in the Pennsylvania federal district court. Urban Outfitters argued that the dismissal of those claims was not dispositive because the factual allegations supporting the common law claims remained in the complaint, and Pennsylvania law required that the factual allegations, not the causes of action, determined an insurer’s duty to defend. Id. The Court rejected the argument because the same alleged facts that gave rise to common law claims also alleged the statutory violations.
[T]he Court looked to the factual allegations of the complaint in determining that the complaint alleged “action[s] or omission[s]” that were alleged to violate the Song–Beverly Credit Card Act. The fact that those same “action[s] or omission[s]” were also alleged to give rise to common law claims (claims that were dismissed) is irrelevant to the analysis. [Emphasis added.]
What does this case mean? This decision is a significant one. It is one of only a few appellate-level decisions holding that (1) “publication” requires dissemination to the public at large, and (2) that “right of privacy” means the right of secrecy, not the right of seclusion. The decision is the only the second to address and debunk the myth that the phrase “in any manner” changes the meaning of “publication” in Coverage B.