Court of Appeal (Cal.) Says Insurance Policy Covers Pen. Code 632 Call Recording Claims

In Nautilus Ins. Co. v. Mingione, No. G055914, 2019 Cal. App. Unpub. LEXIS 3759 (May 31, 2019), the Court of Appeal held in an unpublished case that Penal Code 632/637.2 claims were no excluded criminal acts and that the penalties available under those sections were covered damages.

We agree with Mingione that public policy and the rules of insurance policy interpretation dictate against application of the criminal acts exclusion. Insurance policy exclusions must be narrowly constructed against the insurer, especially when, based on the coverage section of the policy, an insured would reasonably expect to be covered for the claim at issue. (Ace American, supra, 14 Cal.App.5th at p. 291.) Further, we interpret insurance policies with an eye toward avoiding harm to the public. (Garnes, supra, 11 Cal.App.5th at p. 1305.) Here, the Policy covered advertising injury, defined as including various torts, some of which could also be classified as criminal conduct, such as false arrest or imprisonment (§§ 236, 237), infringement of copyright (18 U.S. Code, § 2319), or invasion of privacy (§ 632). The taping of the interview and real time and subsequent viewing by Events’ personnel not conducting the interview fall within that definition of advertising injury under the Policy, i.e., “oral or written publication, [*19]  in any manner, of material that violates a person’s right of privacy.” Events would reasonably expect to be covered for claims alleging these torts, even if they are also potentially crimes. If excluded, coverage under the Policy would be illusory.

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The statute provides damages only to parties who have been injured. Thus, it is reasonable to conclude the damages provided are remedial. Because the amount of actual damages for this type of injury is likely to be small, treble damages makes the remedy meaningful. And because the invasion of privacy injury for which section 637.2 compensates can be difficult to quantify, the statute also provides the $5,000 alternative recovery, to fully and properly compensate the injured party. Likewise we are not persuaded by the claim damages under section 637.2 are “duplicative” of punitive damages. This has no bearing on the question before us. We also reject Nautilus’s contention public policy prohibits shifting of penalties to insurers, because damages under section 637.2 are not penalties. Both the language of section 637.2 and principles of insurance policy interpretation lead to the conclusion the amounts sought by Mingione [*25]  are damages covered by the Policy and not uninsurable penalties. Nautilus has not adequately explained why the recoverable amounts provided for by section 637.2 should be treated as penalties and therefore not covered by the Policy. Rather, Nautilus has relied on a strained interpretation of the words in the statute in violation of principles of statutory construction.