Tough Call: Navigating the Challenges of TCPA Insurance

As an insurance agent, one of the most difficult risks to insure in today’s market is exposure to the Telephone Consumer Protection Act (TCPA). Despite landmark rulings and ongoing regulatory changes, the TCPA remains a thorny issue for businesses that engage in telemarketing, especially those who are uninsured or underinsured. At DOXA Insurance, we’ve seen firsthand the challenges in finding adequate coverage, and as an agent, I understand how daunting this landscape can be for both clients and insurers alike.

The TCPA Landscape: What’s at Stake?

Unsolicited robocalls and spam texts continue to frustrate consumers, and regulators are cracking down harder than ever on violators of the TCPA. In parallel, plaintiff attorneys have zeroed in on TCPA violations as fertile ground for class-action lawsuits. As of May 2023, TCPA lawsuits increased by a staggering 79% compared to the previous year. Despite some favorable rulings, such as the Supreme Court’s decision in Facebook vs. Duguid, which narrowed the definition of an automatic telephone dialing system (ATDS), the overall impact on reducing lawsuits has been minimal.

For businesses, TCPA violations can lead to statutory fines ranging from $500 to $1,500 per infraction — and that adds up quickly. Companies making thousands of calls or sending texts could be on the hook for tens of millions in damages. This risk is exacerbated by the fact that TCPA cases are often filed as class actions, making the stakes even higher.

Original Scope of the TCPA

Enacted in 1991, the TCPA was initially designed to protect residential landlines from unsolicited calls. Mobile phones were a rarity then, and the law primarily targeted “automatic telephone dialing systems” used to spam home phones. However, over time, litigation has expanded the scope of the TCPA to include not just robocalls, but also order confirmations, appointment reminders, and promotional texts sent to mobile phones.

Today, even a single violation can lead to hefty fines, and because there’s no cap on damages, it’s easy for companies to rack up significant penalties. It’s no surprise that TCPA cases have become a favorite target for plaintiff attorneys, especially since the law doesn’t provide for attorney’s fees, making class actions more attractive.

Why Facebook v. Duguid Didn’t End the Lawsuits

In 2021, the Supreme Court ruling in Facebook vs. Duguid was expected to curb TCPA lawsuits by narrowing the definition of ATDS. However, while the ruling clarified that an ATDS must either store or produce telephone numbers using a random or sequential generator, it hasn’t reduced litigation as much as some had hoped.

Instead of cutting down on lawsuits, the ruling shifted the focus. Plaintiff attorneys now argue over whether calls were made using a device capable of random number generation, even if that wasn’t the method used. As a result, the risk remains high, particularly for businesses heavily reliant on telemarketing or automated systems.

Rising Threats from Text Messaging

In addition to robocalls, text message marketing has become a growing area of concern under TCPA rules. Text messages are considered “calls” under the TCPA, and sending unsolicited texts without proper consent can lead to costly settlements. With 11.6 million spam texts sent across American wireless networks in March 2023 alone — a number increasing monthly — companies are more vulnerable than ever to TCPA lawsuits.

Even well-meaning businesses can find themselves in hot water. For example, healthcare company AdaptHealth faced a $6 million settlement after sending 220,000 unsolicited text messages, despite being asked to stop. This case highlights how easily a TCPA violation can turn into a massive financial liability.

The Insurance Challenge

Finding insurance coverage for TCPA risks is one of the most complex tasks agents face today. Many standard policies, such as Errors & Omissions (E&O) and Commercial General Liability (CGL), now exclude TCPA claims, or only provide defense coverage, leaving companies exposed to significant damages.

Here’s a closer look at the key types of coverage that may apply — but often come with limitations:

• Errors & Omissions Insurance (E&O): While this is a logical option for telemarketing firms and similar businesses, few carriers provide adequate TCPA coverage, and many include exclusions or low coverage limits. For clients with high exposure, finding the right E&O policy can be a challenge.
• Commercial General Liability (CGL): Historically, CGL policies offered TCPA protection, but today, nearly all CGL policies exclude TCPA claims. It’s increasingly rare to find a CGL or umbrella policy that covers these risks.
• Directors & Officers Insurance (D&O): D&O policies once covered TCPA-related damages, but most now exclude these claims. Some policies still provide defense-only coverage, but given that most TCPA lawsuits result in settlements rather than dismissals, this may not be enough.
• Cyber Insurance: Cyber insurance might seem like a fit for TCPA claims, but most policies specifically exclude TCPA damages. Similar to D&O coverage, some cyber policies offer defense-only protection, which may leave companies underinsured.

Strategies for Agents

As an agent, guiding your clients through the maze of TCPA risks requires a deep understanding of both the law and the insurance market. TCPA is a strict liability statute, which means even unintentional violations can result in substantial penalties. Clients who rely heavily on telemarketing or SMS campaigns need to be aware of these exposures and have the right coverage in place.

To navigate these challenges, it’s crucial to work with a knowledgeable broker, like DOXA Insurance. At DOXA, we specialize in helping clients find the right solutions for their unique risk profiles, particularly when it comes to emerging challenges like TCPA. We know how difficult it is to find policies that balance coverage with cost, and we work closely with carriers to find the best options available.

Bottom Line

The TCPA landscape remains fraught with risks, and businesses who engage in telemarketing need to be vigilant. Despite favorable legal rulings, TCPA remains a challenging area, with lawsuits continuing to rise. Agents must help clients navigate exclusions and coverage gaps to protect them from potential multimillion-dollar liabilities.

At DOXA Insurance, we have the expertise to help you and your clients find the right balance between protection and affordability. Reach out to our team today to learn more about how we can assist with your TCPA coverage needs and help safeguard your clients from this ever-evolving risk.