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Insurer must indemnify genealogy firm that made DNA results public

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A genetic genealogy firm is entitled to indemnification and defense coverage by a Markel Corp. unit for the inadvertent release of personal information under its professional liability policies, and a policy exclusion related to receiving unsolicited communication does not apply, says a federal District Court.

Houston-based Gene by Gene Ltd., which owns and operates familytreedna, a genetic genealogy website, had been issued four professional liability policies by Markel unit Deerfield, Illinois-based Evanston Insurance Co., according to the ruling by the U.S. District Court in Houston in Evanston Insurance Co. v. Gene by Gene Ltd. The ruling, which was issued Jan.6, was publicized this week.

In May 2014, Gene by Gene was sued by Michael Cole on behalf of himself and others in U.S. District Court in Anchorage, Alaska, for allegedly improperly publishing his DNA test results on its website without his consent, in alleged violation of Alaska's Genetic Privacy Act.

Evanston refused to provide coverage and a defense in the underlying lawsuit based on an exclusion in the policies titled “Electronic data and distribution of material in violation of statues,” which applies to the unsolicited receipt of communications, according to the ruling.

Evanston filed suit in the court in July 2014, seeking a declaration it was not obligated to defend or indemnify Gene by Gene. Gene by Gene filed its own countersuit in August 2014, seeking coverage and defense in the matter and claiming breach of contract.

The District Court ruled in Gene by Gene's favor, holding Evanston was obligated to provide coverage under its policies' advertising injury and personal injury coverage. Evanston's request “falls under the policies' definition of damages. Accordingly, the court finds Gene by Gene, as the insured, has met its burden to establish coverage under the terms of the policy,” said the ruling.

The exclusion cited by Evanston does not apply, the ruling said. The policy's exclusion cites the Telephone Consumer Protection Act of 1991, which generally regulates the use of unsolicited telephone calls and fax transmission to consumers and the CAN-SPAM Act of 2003, which generally regulates the use of unsolicited, fraudulent abusive and deceptive emails to consumers. The third section of the exclusion, which was cited by Evanston, states the exclusion applies to any other rule that prohibits or limits the communication of information, according to the ruling.

Gene by Gene's contention the exclusion does not apply to Alaska's Genetic Privacy Act is reasonable, says the ruling. “The Genetic Privacy Act does not concern unsolicited communication to consumers, but instead regulates the disclosure of a person's DNA analysis,” and does not “address the type of unsolicited seclusion invasion contemplated by the exclusion,” said the ruling which also granted Gene by Gene summary judgment on its breach of contract counterclaim.

Commenting on the ruling, Joshua A. Mooney, a partner with White & Williams L.L.P. in Philadelphia, said it could be influential to the extent policyholders seek coverage for either cyber claims or other types of disclosures of personal information.

However, he added, it would not apply in policies that include the Insurance Services Offices Inc.'s revisions of its standard commercial liability form, which include a mandatory exclusion of coverage for personal and advertising injury claims arising from the access or disclosure of confidential information.