By: Joshua Mooney
Yesterday, the U.S. Court of Appeals for the Eighth Circuit held that an insurer had provided adequate notice of the Distribution of Material exclusion in a renewal policy to make the exclusion enforceable in the context of an underlying Telephone Consumer Protection Act (TCPA) lawsuit. American Family Mutual Insurance Company v. Vein Centers for Excellence, Inc., 2019 U.S. App. LEXIS 98 (8th Cir. Jan. 3, 2019). What makes this decision interesting is that the insurer had to rely on deposition testimony to establish a standard business practice. As more and more plaintiffs’ attorneys are using lack of notice to argue that the Distribution of Material exclusion is ineffective, American Family illustrates an effective way to establish adequate notice where actual documentation may be lacking.
In American Family, the insured was sued in a putative class action for violation of the TCPA arising from the dissemination of unsolicited facsimiles. Id. at *2. The insured, Vein Centers, tendered the lawsuit to its insurer, which undertook the defense subject to a full reservation of rights. Id. The insurer thereafter commenced coverage litigation seeking a declaration that it had no duty to defend or indemnify, later adding the underlying named plaintiff to the lawsuit. Id. The parties cross-moved for summary judgment, with the insurer arguing that coverage was prohibited by the Distribution of Material exclusion (sometimes referred to as the TCPA exclusion). Id at *3-4. The claimant argued that the exclusion was unenforceable because the insurer had failed to properly notify its insured of the exclusion’s addition when the policy had been renewed. Id. at *4. The trial court rejected the argument and granted the insurer summary judgment. Id.
On appeal, the claimant maintained that the insurer had provided inadequate notice of the exclusion. It argued that “the exclusion constituted a constructive nonrenewal of the Businessowners Policy, for which American Family failed to provide notice,” thereby making the exclusion ineffective. Id. at *9 The insurer did not dispute its obligation to provide notice of the constructive nonrenewal, but argued that it had provided adequate notice.
To support its argument, the insurer relied on the deposition testimony of its corporate designee regarding the standard business practice of providing notice to policyholders when new exclusions were included in a renewal policy. The Eighth Circuit held that the testimony established a standard business practice, which, in turn, created a presumption that the insured had received notice of the exclusion. Id. at *10-11. The court explained:
To establish compliance with the notice requirements under Missouri law, American Family offered the deposition testimony of Ms. Deborah Woodcock, one of its corporate representatives. Ms. Woodcock testified that American Family mailed a Coverage Summary Letter (“CSL”) to Vein Centers more than sixty days prior to the Businessowners Policy renewal date. Ms. Woodcock further testified that it was American Family’s standard business practice to include with the CSL a Policyholder Communication (“PLC”), which is a notification of changes made to an insured’s policy. Ms. Woodcock went on to identify an internal communication sent to American Family agents and staff, which indicated current holders of the Businessowners Policy would be sent a PLC notification setting forth the newly instituted “Distribution of Material in Violation of Statutes” exclusion. While Ms. Woodcock could not produce an actual copy of this PLC addressed to Vein Centers, her testimony established it was likely mailed to Vein Centers as part of American Family’s custom and procedure of transacting business. This evidence creates the presumption that Vein Centers received notice of the exclusion.
The court conceded that the presumption of a letter’s receipt by the insured was “not unassailable,” stating that “[w]hen a purported sender presents evidence that a letter was mailed, the presumption of receipt ‘may be rebutted by evidence it was not, in fact, received.’” Id. at *11. However, in the case before it, because neither the insured nor the claimant offered evidence to rebut the presumption, the insurer was entitled to summary judgment. Id.
Finally, the court summarily rejected the argument that the testimony of the insurer’s corporate designee had been insufficient because she “did not personally send the documents and lacks personal knowledge as to whether the documents were sent.” Id. at *12. The court explained that “Missouri law does not require direct proof or personal knowledge of mailing; only ‘evidence of the settled custom and usage of the sender in the regular and systematic transaction of its business.’” Id. (citation omitted). Simply put, “[s]peculation” that the insurer’s normal business procedures were not followed “is not the same as affirmative evidence that [the insured] did not receive the documents.” Id. As a result, the claimant did not provide a sufficient evidentiary basis to rebut the presumption that Vein Centers received notice in order to withstand summary judgment.