Blast Communication Can Backfire
By Sue C. Quimby, CPCU, AU, CIC, CPIW, DAE – Assistant Vice President/Media Editor
Advancements in technology have changed the way companies communicate with their clients and potential clients. Blast communication—via fax, phone call or text message—enables a company to get their message to many people or companies at the same time. However, sending communication that is unsolicited or unwanted may be a violation of federal regulations, and can result in significant penalties and fines. Such violations may not be covered in standard insurance policies. Helping clients understand the possible negative consequences of blast communication is another value-added service of the professional insurance agent.
According to the Federal Communications Commission (FCC), there are two criteria that must be met in order to legally send a fax. First, there must be an established business relationship between the parties. Second, the fax number must have been obtained either directly from the intended recipient, or from publically available advertisements, websites, etc., and the intended recipient must not have indicated they do not accept unsolicited faxes. In addition, there must be a no cost means for the recipient to opt out of future communication, such as an 800 number, local phone number or website, included in the fax (www.fcc.gov).
Similar rules apply to robocalls, or those made by autodialer, where no human intervention is involved. Companies must have prior written consent, and not just an established business relationship, in order to robocall a home or cell phone. An opt out option is required. The caller must provide their name, the company they are representing, as well as the company’s address.
The Telephone Consumer Protection Act (TCPA) was enacted in 1991 to protect consumers from unwanted solicitations via phone call, fax or text. The FCC is charged with creating the rules and regulations for its implementation. Violations of the TCPA can incur severe penalties and fines, including up to $1,500 per phone call.
The insurance industry response has been to specifically exclude TCPA violations from coverage under standard general liability insurance policies. While courts have generally upheld these exclusions, the same cannot always be said for other types of policies, such as Directors’ and Officers’. Some courts have denied coverage based on invasion of privacy exclusions in such policies (Los Angeles Lakers vs Federal Insurance Company, April 2015) (www.financierworldwide.com).
A number of class action suits have been filed against companies alleging violations of the TCPA. It is interesting to note that determinations of coverage or no coverage are fairly evenly split. Some companies have settled cases rather than incur the expenses and publicity of a trial. In 2017, in the case of Boise vs ACE American Insurance Company, the company agreed to a $9.8 million settlement, but did not admit to any wrongdoing. There were 107,000 claims filed that ACE American had improperly called people on the Do-Not-Call-Registry (https://gryphoncompliance.com).
Coverage for sending unsolicited faxes may or may not be covered under a company’s Directors’ and Officers’ (D&O) or Errors and Omissions (E&O) policies. Courts have been mixed in their coverage determinations. Exclusions that come into play include invasion of privacy. The LA Clippers sent unwanted faxes that courts determined to be an invasion of privacy, and therefore excluded under the D&O policy. (LAC Basketball Club vs Federal Insurance Company, 2014) (www.finan cierworldwide.com).
When used correctly, blast communication can be an effective and efficient marketing tool. Incorrect use can be costly. Businesses that use these marketing tools should carefully review their procedures to ensure compliance with TCPA and other regulations. Employee training is another key tool to avoid TCPA violations and suits. A thorough review of the business’s insurance coverage is always recommended. Helping clients understand the potential benefits and pitfalls of blast communication is another sign of the true insurance professional.
