Placing You First Insurance Podcast by CRC Group

Tough Call: How to Insure TCPA Liability Risks

October 06, 2021 CRC Group, Harold Field, Dan Wentz
Placing You First Insurance Podcast by CRC Group
Tough Call: How to Insure TCPA Liability Risks
Show Notes Transcript

Costly litigation alleging violations of the Telephone Consumer Protection Act (TCPA) has made coverage hard to get for businesses that contact customers and prospects by phone or text. We explore why markets for TPCA risks are scarce and how to work with a knowledgeable wholesale broker to help insureds.

Featuring:

  • Harold Field is Office President of CRC New York and a member of the ExecPro practice group.

Subscribe to CRC Group on Youtube
Subscribe to Tools & Intel (email newsletter)
Read Past Tools & Intel Articles
Follow CRC Group on LinkedIn

Visit REDYIndex.com for critical pricing analysis and a snapshot of the marketplace.

Do you want to take your career to the next level? Join #TeamCRC to get access to best-in-class tools, data, exclusive programs, and more! Send your resume to resumes@crcgroup.com today!

Dan Wentz:

For decades, the US government has been trying to stop unsolicited phone calls. But in the process, they've created a firestorm of litigation through ineffective regulation, regulations that put legitimate business at risk. As they simply try to communicate with their customers. We're exploring the Telephone Consumer Protection Act, otherwise known as TCP a will talk with Harold field, the office president for CRC in New York and a member of the exec pro practice group. He's got a background in dealing with these types of risks, and I can't wait to pick his brain next. Welcome to the placing you first podcast from CRC group. I'm your host, Dan Wentz. And this podcast features news and insights from CRC group's vast knowledge base of 4300 plus associates who right in excess of $23.5 billion of premium annually, and we're giving you insider access to what's happening in our company and the types of insurance we place. This is the placing you first podcast where we're joined by Harold field today, who has a background in dealing with TCPA. And I guess we should start there, Harold, what is TCPA stands for?

Harold Field:

First of all, thanks for having me, Dan. It's an honor to be here. So TCPA the very little definition is the telephone consumer protections act of 1991.

Dan Wentz:

Okay, and what exactly does it do?

Harold Field:

So the act, it's a congressional act signed into law, it's technically a statute. What it does is it protects consumers who do not welcome telephone solicitation phone calls. If you go back to the 1980s and 90s, there was a huge surge in the telemarketing industry. And by 1990, it got to 18 million calls a day, if you could imagine. And a lot of these were very disruptive, and they were during dinner time. And it was on landlines, not necessarily cell phones the way it is now. And so So Congress signed this this law in order to sort of curb the the nuisance of these invasive and unwanted phone calls. And they put some rules around them that were pretty vague. And, and I'm sure we'll get into that. Yeah, for sure.

Dan Wentz:

Well, first of all, I should say, I don't think it works. Again, I just got a spam phone call right before we got on the phone here today. It doesn't stop. So let's talk about what a violation is just Sure, you know, like what is what is basically what is a violation of the TCPA?

Harold Field:

Well, there's a lot of ways to violate the TCPA. There's some low hanging fruit easier ways to prove and there's some more difficult ways to violate it. But calling individuals who are on the DNC, which is the national registry for the Do Not Call list, that is the first way to violate it. The second way to violate it is to call individuals before the time of 8am. And after the time of 9pm, in their timezone not in the timezone of the caller. But other recipient third way to violate it is to call individuals who have not given this and this in particular goes to automatic dialing systems and calling cell phones. But for individuals who did not give explicit written consent to be called. Those are the simplest of the easiest ways to violate the statute, a TCPA violations a technical violation, it's like akin to a technical violation or a technical foul in basketball, there doesn't have to be any harm done to the plaintiff. The call just had to have taken place, right in violation of the law. So it doesn't matter if it inconvenienced you or if it caused some emotional distress. It's irrelevant to the case. It's what we refer to as a strict liability statute. Did you do it? Yes, you're guilty. Here's your penalty.

Dan Wentz:

Why should business owners and insurance agents care about this,

Harold Field:

they should care because TCPA is the most frequently a one of the most frequently sued under consumer protection statutes out there. And there's a few different consumer protection statutes that have high frequency. One is most of us know the Fair Debt Collection Practices that the second one is the Fair Credit Reporting Act. So it's the FDCPA, the FCRA, and then there's the TCPA. So it is it is in that top three, if you look at the frequency, so there's around 6200, CFPB complaints per month of those 6200. A number of those turn into individual actions and then class actions. If you look at the TCPA. In particular, for the month, we'll go back to July of 2021. They had 108, there were 180 TCPA lawsuits filed, and 52% of those were class action. So roughly 92 of them were class actions. Now that's a one month okay. Keep in mind that the average class action settlement does settle, settles around $6 million. So the numbers can be pretty good. catastrophic, okay, so with FDCPA, in particular, which is the leader, they have 600 debt 623 cases in July, only 24% of those were a class action, so roughly 152. So you can see how the, there's a much higher percentage of class action lawsuits from TCPA violations. And the settlement value at 6.6 million on average, is pretty catastrophic. And that's why we all should be pretty concerned. I mean, this is this is a very, very big issue. It's it's, it's it's tremendously catastrophic for midsize and large businesses and forget about small businesses. And it's an issue that we we just don't talk about nearly if I'm

Dan Wentz:

a lawyer, I hear those numbers and I go, Oh, I want in on that. Right. I want those million dollar settlements, right. So you're sure your resources to try and make something happen there. So in the article that we wrote that accompanies this podcast, we talked about insurance being scarce for this risk. Can you go into some detail about why that is?

Harold Field:

Yeah, absolutely. Dan, insurance is scarce. You know, it's actually it's, it's kind of interesting, because for most major exposures that are sort of new to the to the economy or new to industry, the insurance industry is usually very quick to respond with a product or, or some kind of enhancement to address that exposure. If we look at like EP Li claims in 1980s, insurance was very quick to respond with it with an employment practices liability product for, you know, things like wrongful termination, and sexual harassment. If you look at cyber liability insurance was actually out way ahead of the curve. There were cyber liability policies being placed before there was really any litigation for for, you know, for, for cyber events. But if you look at this particular issue, it's kind of been the opposite. insurance carriers have kind of run for the hills. When this litigation started to take off in the early 2000 10s 2011 2012, you immediately started to see the insurance carriers throwing TCPA exclusions onto their policies. In particular, you know, commercial general liability is always the first line of defense, they've even gone so far as to reshape the way the form is the isoform is to actually include that telephone communication, Telephone Consumer Protection, that exclusion, so that the industry is run away from the exposure didn't run towards it with the solution. I don't know if that answers the question, why. So the question why is, is honestly, it's it's due to the unpredictability of the claims, the high frequency and the high severity. And then this whole other issue of whether or not it's actually sort of a moral issue or moral dilemma, covering a company for performing illegal acts, which essentially violating the TCPA is performing an illegal act. In many cases, it's actually found to be a willful violation. So I think those are the biggest struggles that the insurance industry has, with this particular business.

Dan Wentz:

If I'm a carrier, looking at this, I'm probably considering other risks that are not playing in this realm, you know, not not in the legal realm or, you know, potential gray area that comes along with this. Yeah. from a regulatory standpoint. For sure. Talk about the insurance part of this, you briefly mentioned CGL, what types of insurance could respond to this TCPA risk?

Harold Field:

Well, yeah, I mentioned CGL. Because CGL is is the most commonly carried liability policy for any small midsize or even large business. And it's where, where an insured tends to go for coverage for anything that happens right in the liability world. So so the way those products have responded, initially, citing privacy exclusions as the issue, whether it fell under personal advertising injury, or whether it was actually property damage, or there are a lot of different arguments, a lot of different litigation until eventually, carriers started throwing a TCPA exclusion onto the policies as sort of like, you know, get rid of the ambiguity. So So we know that product is is not is not going to be the insurance resort for for those that type of litigation. So if you look at what's left, and most of the defendants in TCPA litigation, from from a pure numbers, perspective, that 75% of them are professional service firms. So we're talking about financial institutions, whether they're lenders or financial advisors, or money managers, right to debt collectors, and everybody in between, right, provide some kind of financial service. Also, you've got the healthcare industry, which is predominantly professional services. So you so the professional liability industry represents about 75% of all the litigation around TCPA violations. So the logical thought process is let's look to an E and O product to give some coverage and that is predominantly where they will find it. If marketing and advertising is inherent to the professional services they provide. In other words, they make phone calls for a living, then you can probably find coverage in that product. If you have a broker that's out in front of it enough that has the intelligence or the insight to the exposure and to the products and to which markets are actually providing it, you can get TCPA coverage. In most cases, a watered down version of it, whether it's just defense costs, or sub sub limit for for density, resettlements pink you can get that and and a lot of cases you could also get coverage for fines and penalties, which is very important in this class of business. So, so it's it's the E and O is the right place to go for professional service firms. But if you're not a professional service firm, you're still exposed. We know there's a lot of those like Dish Network, one of the largest settlements, I mean, their satellites technology firm, there's a lot we have a water filter manufacturers that have had one in particular had a huge TCPA settlement. They're not in the professional service world. We've seen many in sort of the health care industry that you can argue whether or not that's professional services. So there's big, big, big litigation around this regardless of industry. But if you're not in a professional services world, you're not going to buy you know product that specifically in the cover this, then what do you do? Another potential place to find coverage is in the DNO policy. The DNO policies have been pretty good about excluding TCPA claims as well. And they have privacy exclusions built into their policy that will prohibit coverage. But good enough broker can probably navigate through that and soften the language or give some car backs. There are one or two carriers out there that will give explicit TCPA coverage on a sub limited basis on the DNO policy. The last line of defense I would look to is a cyber liability policy. And the reason I say that is because it's probably the best place but it is the last place. Cyber liability is essentially a privacy policy. And every other product is citing their privacy exclusion to get out of TCPA claims. So it really is probably the most logical place to have the coverage. And there are a handful of carriers that will give some explicit TCPA coverage in their cyber cyber liability policy. Again, you're talking about some watered down coverage with sub limits and things like that. But it's possible. So just having a really good broker on the account, who understands exposures, who understands the marketplace, can make all the difference in the world for you and your client to make sure that they have the right coverage in place.

Dan Wentz:

Obviously, there's a lot of steps that you could take from a business perspective to mitigate this exposure for sure. There's a lot of detail work there the problem, perhaps a lawyer or someone who's familiar with your business specific business should take a look at but can you give some high level ways that, you know agents can help their their clients mitigate this exposure and maybe make some recommendations?

Harold Field:

Yeah, and I want to I definitely want to highlight the fact that insurance should be your last line of defense. I mean, this should not by any stretch of the imagination be your primary, you know, strategy for protection around this type of litigation. First and foremost, every company that produce that sells a product or service and advertises in any way shape or form should have some kind of TCPA compliance plan in place. You know, there's a lot of firms out there that that provide that service. There's also a lot of information on the internet. I mean, it's not that difficult to know sort of what the what what the checkboxes are for a particular firm. So you want to make sure that you're you're abiding by the National Do Not Call it so you need to have sort of an easy access to updated versions of those lists and perhaps ways for that list to integrate in with your internal Do not call list. You want to make sure your phones aren't in operation before 8am. And after 9pm of the recipients whoever you be calling their time timezone before 899 pm and there are there is software to restrict phone calls to be made at those times. There's automatic dialing systems are a big issue. Now there was recently a case called Facebook versus do good that limited the definition of automatic dialing systems. It was very, very broad for a really long time It included sort of any, any device that would be your any smartphone would be would constitute an automatic dialing system. And the reason why is because it had to have the ability to randomly sequence phone numbers to doc now just having the ability any smartphone of course has the ability to but also there was no definition around predictive dialing and now there is as a result of that case so it's gotten a little bit Better a little bit easier for an insured to sort of navigate through the laws and comply. Careful with the technology you're using. Stay away from automatic dialing systems, they're very bad. They cause trouble with the TCPA and make sure that you're abiding by all the other rules. Express written consent is very clear. Do you have it or don't you have it needs to be clear cut, and easy to read. Otherwise, it'll usually get thrown out. So there's there's some things that you can do as a company as an organization as an agency for a client to help them mitigate the exposure and insurance possibly being the last line of defense.

Dan Wentz:

Yeah, and so if you get to the point where you want to talk about insurance, maybe learn some more about this. It is very specific to your business and what your operations are. So it's a good idea to give a call to one of our brokers here at CRC group for sure, Harold Of course you would be my first call but I'm sure that there's a lot of people that could feel that call and help you out. So as always, you can find all of our brokers producers up on our website, CRC group COMM And the Herald man, great podcast. Thank you very much for all this information. It's a complicated issue, but you made it seem so simple.

Harold Field:

Thank you, Dan. You you all your energy, got me excited about it. So I appreciate it. Otherwise, very mundane topic. So thank you for the for the Give me the time and the chance to do this.

Dan Wentz:

Yeah, no worries. I hope to talk to you again soon. Take care.