8th Cir. Holds that Insurer Owed No Duty to Cover Attorney Debt Collector for FDCPA Violations

In Rodenburg LLP v. Certain Underwriters at Lloyd’s of London, No. 20-2521, 2021 U.S. App. LEXIS 25516, at *2-4 (8th Cir. Aug. 25, 2021), the Court of Appeals for the 8th Circuit found no coverage for FDCPA claims under an attorneys’ insurance policy.  The facts were as follows:

Rodenburg, whose primary business is debt collection, obtained a default judgment on a debt owed by a “Charlene Williams.” In early November 2016, Rodenburg served a notice of intent to garnish “Charlene Williams’s” wages at the residential address associated with the debt. Receiving no answer, Rodenburg then served US Foods, Williams’s employer, with a garnishment notice. Williams contacted Rodenburg [*3] on December 21, 2016, and allegedly informed it that she was not the debtor against whom it had a default judgment. Rodenburg allegedly ignored this information and proceeded to garnish Williams’s paychecks for six weeks beginning on December 29, 2016. After a lawyer informed Rodenburg in February 2017 that it indeed had the wrong “Charlene Williams,” Rodenburg ceased garnishment and returned the wrongfully garnished funds to Williams.  Williams thereupon sued Rodenburg, asserting several theories including wrongful garnishment, tort-based claims, and violations of the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C § 1692 et seq. The complaint alleged that Rodenburg violated the FDCPA by: communicating with third parties, including her employer, about the alleged debt, see id. § 1692c(b); garnishing her wages even after learning that it had identified the wrong person, see id. § 1692d (prohibiting conduct in connection with a debt collection that harasses, oppresses, or abuses); representing that Williams owed a debt, representing that it had a right to collect the debt, attempting to induce Williams to pay the debt, and implying that Williams had committed other disgraceful conduct, see id. § 1692e (prohibiting the use of “false, deceptive, or misleading representation or means in connection with” debt collection); and collecting or attempting to collect the debt without legal authority to do so, see id. § 1692f (prohibiting the use of “unfair or unconscionable means” to collect a debt). Citing the FDCPA’s recognition of “a person’s inherent right to privacy in collection matters,” see id. § 1692(a) (“Abusive debt collection practices contribute . . . to invasions of individual privacy.”), the complaint also alleged that Rodenburg’s actions—communicating to Williams’s employer about the debt, garnishing her wages without legal authority, and willfully continuing to collect the debt after having been told about its potential mistake—amounted to common law invasion of privacy. Williams also alleged that Rodenburg had converted her wages and that its actions caused her to suffer emotional distress, humiliation, and temporary interference with the use and enjoyment of her property.

The Court of Appeals found no coverage due to the “Violation of Statutes” Exclusion.

The Violation of Statutes Exclusion excludes coverage for: “8. Distribution of Material in Violation of Statutes. Any liability arising directly or indirectly out of any action or omission that violates or is alleged to violate: (a) The Telephone Consumer Protection Act (TCPA), . . . ; (b) The CAN-SPAM Act of 2003, . . . ; or (c) Any statute, ordinance or regulation, other than the TCPA or CAN-SPAM Act of 2003, that prohibits or limits the sending, transmitting, communicating or distribution of material or information.”   Cincinnati argues that the exclusion applied because the FDCPA is a statute that “prohibits or limits the . . . communicating . . . of material or information.” See 15 U.S.C. § 1692d (limiting debt collectors’ ability to use threats of violence, publicize lists of consumers allegedly refusing to pay debts, cause a telephone to ring repeatedly or continuously, or engage someone in telephone conversation repeatedly or continuously).  Rodenburg asks that we construe the Violation of Statutes Exclusion more narrowly, arguing that FDCPA violations are not included in Subsection 8(c) because the FDCPA does not limit communication in the same way that the TCPA and the CAN-SPAM Act of 2003 do.3 See Bullseye Rest., Inc. v. James River Ins. Co., 387 F. Supp. 3d 273, 282-84 (E.D.N.Y. 2019) (applying New York law and finding, based on rules of construction, including ejusdem generis, more than one reasonable reading of an identical exclusion). Rodenburg reasons that applying a literal reading of Subsection 8(c) would exclude from insurance coverage a major source of potential liability—alleged FDCPA violations—for a debt collection law firm like itself. . . . The policy language is unambiguous and clear on its face. We therefore must enforce it as written. The Violation of Statutes Exclusion excludes coverage for Rodenburg’s potential FDCPA liability because the statute falls within the plain language of Subsection 8(c). See 15 U.S.C. § 1692d.  Rodenburg argues that even if the policy excluded coverage for the injury caused by the alleged FDCPA violations, it did not exclude coverage for the injury caused by the alleged intentional torts because “Cincinnati cannot show that a violation of the FDCPA caused Rodenburg to invade [Williams’s] privacy, defame her, or maliciously prosecute her.” [*13] HN6 The language of the Violation of Statutes Exclusion is broad, however, excluding coverage for not only statutory liability but also “[a]ny liability arising directly or indirectly out of any action or omission that violates or is alleged to violate” the FDCPA. “The words ‘arising out of’ mean causally connected with, not ‘proximately caused by’ . . . .” Norgaard v. Nodak Mut. Ins. Co., 201 N.W.2d 871, 875 (N.D. 1972) (citation omitted). “The term is ordinarily understood to mean ‘originating from,’ or ‘growing out of,’ or ‘flowing from.'” Id. (citation omitted). The question, therefore, is whether Williams’s complaint alleged covered injury that did not originate from allegedly FDCPA-violating conduct. It did not. As discussed above, the policy covers only Williams’s alleged injury that was caused by defamation, malicious prosecution, or publication in violation of privacy. The complaint alleges the conduct underlying the FDCPA claims was the same conduct underlying the invasion of privacy claim. The unpled defamation and malicious prosecution offenses similarly flow from Rodenburg’s allegedly FDCPA-violating conduct—unprivileged communication with third parties allegedly violates 15 U.S.C. § 1692c(b), and Rodenburg’s collection actions lacking probable cause allegedly violate 15 U.S.C. § 1692f. Thus, the Violation of Statutes Exclusion excludes coverage for liability arising from those offenses, and the policy does not cover Rodenburg’s potential liability to Williams for any of the covered injury alleged in the complaint.