Litigation stemming from alleged violations of the Telephone Consumer Protection Act, although down in 2018 from previous years, remains a major headache for policyholders, who are also facing resistance from insurers unwilling to provide coverage.

Much of this litigation focuses on whether a called party has provided prior express consent to receive calls or texts using an automatic telephone dialing system. Critics complain the 1991 statute is based on now-outmoded fax technology that makes even legitimate business-to-consumer phone calls legally hazardous.

The TCPA, which had an original intent of combating unsolicited telemarketing calls to consumers, is a major magnet for class action litigation because it is a strict liability statute that awards $500 per violation and up to $1,500 per willful violation.

Even a misdialed number could result in liability under the law, which is administered by the Federal Communications Commission, according to experts.

Meanwhile, a case accepted for review by the U.S. Supreme Court and an upcoming California Supreme Court ruling could have a dramatic impact on future litigation, while a third significant TCPA case has recently been settled.

According to Grand Rapids, Michigan-based WebRecon LLC, which tracks TCPA litigation, lawsuits filed in 2018 declined 7.8% from 2017 to 9,008 cases.

Lewis S. Weiner, a partner with Eversheds Sutherland LLP in Washington, said reasons for the decline could be the number of cases that have already been filed, as well as a greater level of sophistication by the plaintiffs bar in case selection.

Companies are now more aware of the statute and “are doing their best to comply” with it, said Matthew J. Fedor, a partner with Drinker Biddle & Reath LLP in Florham Park, New Jersey.

But even with a decrease, “there’s still a lot of litigation out there,” and it remains “at least for our clients, one of the most often-litigated statutes,” said Arjun P. Rao, a partner with Stroock & Stroock & Lavan LLP in Los Angeles.

Meanwhile, the FCC is expected to issue guidance on the statute soon.

“We’re hopeful that they’ll issue as soon as they can this year,” said Matthew Webb, senior vice president for legal reform policy with the U.S. Chamber of Commerce’s Institute for Legal Reform in Washington.

The FCC guidance “could dramatically narrow the scope of (telephone) systems that at least some courts believe are subject to the TCPA,” said Mr. Rao.

“I’m hopeful” that with FCC guidance there will “be a return to a bit of sanity with respect to the TCPA,” said Scott Goldsmith, a partner with Dorsey & Whitney LLP in Costa Mesa, California.

Health care and financial firms are a major litigation focus, though experts say all companies using dialing technology or text messaging to contact customers are vulnerable.

Plaintiffs are moving from “the low-hanging fruit,” which were firms that were trying to evade the statute’s provisions, “to the legitimate companies that have made some technical error,” said Matthew L. Knowles, a partner with McDermott Will & Emery in Boston.

There is a “huge spread” between companies who are acting out of their “legitimate business interests” and those that are “flagrantly violating the law,” said Christine M. Reilly, a partner with Manatt, Phelps & Phillips LLP in Los Angeles.

“Companies face a difficult choice” when a putative TCPA class action litigation is filed, said Mr. Knowles. “The business must figure out quickly” if they have a viable defense, and “oftentimes settlement is the only option,” he said.

There may be coverage for TCPA claims under general liability, errors and omissions or directors and officers liability policies, but exclusions are common, experts say.

“It’s oftentimes the case that businesses assume they have coverage” but “may have a rude awakening” when they learn coverage is excluded, said Mr. Knowles.

“Even if you don’t have explicit exclusions,” insurers are declining coverage for a variety of reasons, including privacy exposure, or fines and penalties exclusions, said Mr. Weiner. “It’s more the rule than the exception” that companies will not have TCPA insurance coverage.

However, obtaining coverage is still possible, say some experts.

G. David Carter, a partner with Womble Bond Dickinson LLP in New York, said he encourages policyholders to obtain a rider that affirmatively guarantees TCPA coverage.

This “requires working with an insurance broker that actually understands the TCPA and can help you kind of translate the TCPA issue to an insurer that’s open to providing that coverage.” He added this “definitely requires some legwork,” though.

Otto Foerster, executive vice president of Miami-based broker NEA Insurance Group LLC, said that in conjunction with placing TCPA coverage, he introduces risk mitigation techniques, such as scrubbing the names of known plaintiffs from communications and making sure the cellphone numbers of consumers who have opted in to receive communications are up to date.

“As in any insurance policy negotiation, at least initially, almost anything’s on the table,” said Cort T. Malone, a shareholder with Anderson Kill PC in New York, noting while TCPA exclusions have become more prevalent, “they certainly don’t rise to the level yet of 100% market saturation.” 

Meanwhile, “There’s a fair amount of litigation between insurance carriers and their covered entities as to whether the insurance applies,” said David O. Klein, managing partner with Klein Moynihan Turco LLP in New York.

Results are “sort of split,” said Mr. Rao. “Some courts have intercepted some of these policies and required the insurance to cover them, whereas others have disagreed.”