State high court asked to rule in AIG, Yahoo case

Faced with conflicting lower state court rulings, the 9th U.S. Circuit Court of Appeals is asking the California Supreme Court for its opinion on whether an American International Group Inc. unit must defend Yahoo Inc. in Telephone Consumer Protection Act litigation.

“We need guidance in applying California’s rules governing the interpretation of insurance policies in this context,” states the order by the San Francisco-based 9th Circuit in Yahoo Inc. v. National Union Fire Insurance Co. of Pittsburgh, Pennsylvania.

AIG unit National Union sold Sunnyvale, California-based Yahoo five consecutive one-year policies, according to the ruling. An endorsement negotiated by the two parties deleted an express exclusion arising from TCPA violations but limited the scope of coverage to “personal injury,” according to the ruling.

Yahoo became a defendant in five putative class actions, including two in California, alleging the company had violated the TCPA by transmitting unsolicited text message advertisements to putative class members, according to the ruling.

National Union refused to defend the litigation, and Yahoo filed suit in U.S. District Court in San Jose for breach of contract. The district court granted National Union’s motion to dismiss, concluding the policy’s coverage of personal injury arising of “publication…of material that violates a person’s right of privacy” does not apply to Yahoo’s TCPA liability.

Two California appeals courts have ruled differently on this issue, said the three-judge 9th Circuit panel, in asking the state Supreme Court to consider the issue.

Earlier this month, a federal appeals court upheld a lower court ruling and held an insurer was entitled to deny coverage to a marketing firm charged with violating the TCPA because it had properly notified its policyholder about a policy exclusion, says a federal appeals court in upholding a lower court ruling.