G.M. Sign, Inc., brought a putative class action against MFG in an Illinois court, alleging among other things violations of the Telephone Consumer Protection Act (“TCPA”). The complaint alleged that MFG had on several occasions sent fax advertisements to G.M. Sign and the other members of the putative class, without the recipients' permission.

MFG notified its commercial general liability insurer, St. Paul Fire & Marine Insurance Company, of the lawsuit and demanded a defense and coverage. St. Paul denied MFG's demands.

MFG and G.M. Sign eventually settled, agreeing that MFG was liable to the class in the total amount of $22,536,500. As part of the settlement agreement, MFG agreed to pay $460,000 of this amount and it assigned to the class its claims against and rights to payment from St. Paul under the commercial general liability insurance policies it had issued to MFG.

G.M. Sign, on behalf of itself and the other class members, filed an action in a Georgia court requesting a declaratory judgment that the St. Paul policies covered the settled claims. The parties moved for summary judgment.

The U.S. District Court for the Northern District of Georgia granted summary judgment to St. Paul, ruling that the intentional delivery of fax advertisements did not qualify as an “accident” under Georgia law, even if the sender erroneously believed that it had consent to send the fax advertisements.

G.M. Sign appealed to the Eleventh Circuit. It argued that St. Paul had to indemnify MFG for its TCPA liability because the term “accident” under Georgia law covered injuries resulting from negligence. According to G.M. Sign, MFG sent the faxes negligently because it never intended to send any faxes without the recipients' consent. Thus, according to G.M. Sign, MFG had no intent to injure the recipients.

St. Paul responded that no accident had occurred when MFG sent the faxes because by sending the faxes, MFG intended to cause the relevant property damage: the use of the recipients' fax machines and the depletion of their ink and paper. St. Paul contended that MFG's mistaken belief that the recipients had agreed to receive the faxes was immaterial.

The Eleventh Circuit's Decision

The circuit court affirmed, finding that no accident had occurred because, in sending the faxes, MFG had engaged in intentional conduct premised on erroneous information, which did not constitute an accident.

In its decision, the Eleventh Circuit explained that the St. Paul policies did not define the term “accident” but that, under Georgia law, the usual and common meaning of “accident” was “an unexpected happening without intention or design.”

Relying on Mindis Metals, Inc. v. Transportation Ins. Co., 209 F.3d 1296 (11th Cir. 2000), which held that under Georgia law intentional conduct premised on erroneous information was not an “accident” for general liability insurance purposes, the circuit court found that the fact that MFG had mistakenly thought the recipients had consented to receive the faxes was “insufficient” to render the property damage an accident under Georgia law. Therefore, it concluded, the policies' property damage provisions provided no coverage for the TCPA liability arising from MFG's conduct and the district court had correctly granted St. Paul summary judgment.

The case is G.M. Sign, Inc. v. St. Paul Fire & Marine Ins. Co., No. 17-14247 (11th Cir. April 12, 2019).