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(Article from Insurance Law Alert, January 2016)

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Courts routinely enforce statutory violation exclusions to bar coverage for underlying claims alleging violations of state or federal statutes.  Moreover, as reported in previous Alerts, courts have also applied statutory violation exclusions to bar coverage for non-statutory claims if those claims arise out of statutory violations.  See December and January 2015 Alerts; April and May 2014 Alerts.  However, in a recent decision, a Texas federal district court departed from this trend, ruling that an insurer was obligated to defend and indemnify a suit alleging a violation of the Alaska Genetic Privacy Act notwithstanding a statutory violation exclusion in the applicable policies.  Evanston Ins. Co. v. Gene By Gene, Ltd., 2016 WL 102294 (S.D. Tex. Jan. 6, 2016).

A class action suit against Gene by Gene, a genealogy website, alleged that the company violated the Alaska Genetic Privacy Act by improperly publishing clients’ DNA results without their consent.  Evanston Insurance refused to defend the suit based on an exclusion entitled “Electronic Data and Distribution of Material in Violation of Statutes,” which precludes coverage for a claim based upon or arising out of any violation of (a) the Telephone Consumer Protection Act, (b) CAN-SPAM, or “(c) any other statute, law, rule, ordinance or regulation that prohibits or limits the sending, transmitting, communication or distribution of information or other material.”  Evanston argued that the underlying claim fell squarely within section (c) of the exclusion because the Alaska Genetic Privacy Act prohibits the public disclosure of a person’s DNA analysis.  The court disagreed and ruled in favor of Gene by Gene.

The court applied the doctrine of ejusdem generis to find that section (c) of the exclusion did not apply to alleged violations of the Alaska Genetic Privacy Act.  Ejusdem generis provides that “where general words follow specific words in a statutory enumeration, the general words are [usually] construed to embrace only objects similar in nature to those objects enumerated by the preceding specific words.”  The court reasoned that because sections (a) and (b) of the exclusion (relating to TCPA and CAN-SPAM violations) regulate the use of unsolicited communications (via telephone/facsimile and email, respectively), section (c) should likewise be interpreted to refer to “other forms of unsolicited communication to consumers ‘that intrude[ ] into one’s seclusion.’”  The court therefore concluded that an alleged violation of Alaska’s Genetic Privacy Act is outside the scope of the exclusion because it “does not concern unsolicited communication to consumers, but instead regulates the disclosure of a person’s DNA analysis.”