Cold calls are an essential part of an insurance agent’s sales repertoire, but agents who contact prospects from lists generated by third-party vendors can get themselves and the insurers they represent is big trouble.
That’s because the Telephone Consumer Protection Act of 1991 shields consumers from unsolicited calls, texts and faxes made without their consent.
With TCPA protections expanded in 2015 by the Federal Communications Commission, the nuisance law has become a favorite engine for plaintiff lawyers filing class-action lawsuits against purveyors of unwanted calls.
Insurers are finding themselves ensnared in those class-action complaints through the common law doctrine of “vicarious liability,” and high-dollar settlements against insurers are on the rise, say experts at the law firm of Eversheds Sutherland.
In a widely used strategy, insurance companies pay an outside marketing vendor to collect names and numbers to distribute to independent or semi-independent agents working on behalf of the insurer not directly involved in a sale.
But without a prospect’s “prior express written consent,” such telemarketing is forbidden under TCPA.
Start-up agency owners hungry for new business and who need to do everything they can to attract customers need to be particularly vigilant, experts say.
No Maximum Cap on Recovery
An Illinois federal court found in 2014 that while insurers could not be found directly liable since the insurer did not physically place the calls, an insurance company might be subject to vicarious liability from the actions of the agents.
And that’s all plaintiff lawyers need to hear when looking to sue new targets with deep pockets, such as life and property-casualty insurers.
“Plaintiff attorneys go after entities with the deepest pockets and that typically is the brand,” said Jaime Pickles, general manager of insurance, at Jornaya, a technology company that analyzes consumer leads for insurance and other industries.
Even if the insurance company isn't making the outbound calls, the company still gets pulled into the dispute.
Forty-four law firms were the primary filers of 1,826 TCPA suits examined between August 2015 and December 2016, according to a TCPA litigation white paper published by the U.S. Chamber Institute for Legal Reform.
TCPA provides for statutory damages of $500 to $1,500 per violation with no maximum cap on recovery.
Automated dialing technology, or robocalls, can churn through thousands of names and Internet leads. Marketers and the insurers who use this technology can potentially face tens of millions of dollars in damages, according to TCPA experts.
Settlements over the past four years between plaintiffs and defendant financial services companies and insurers have reached as high as eight figures.
Capital One settled for $75 million, Bank of America for $32 million, MetLife for $23 million, Ace for $9.7 million, State Farm for $7 million and Anthem for $6.25 million, according to data compiled by the U.S. Chamber Institute.
Of the 3,121 TCPA cases filed over a recent 17-month period, most were leveled against the financial services sector – banks and credit card companies.
Financial services companies (excluding insurance) were involved in 36 percent of the 3,121 TCPA cases reviewed, by far the industry sector embroiled in the largest number of TCPA-related suits, according to the U.S. Chamber Institute.
Insurance companies made up only 1.7 percent of the 3,121 cases, which indicates that until now, class action lawyers have generally steered clear of insurance companies.
But the bad news is that going forward insurers provide fertile ground for attorneys looking for revenue from class-action complaints.
“We’re seeing an uptick in insurance activity that is commensurate with other industry verticals,” Pickles said. “Anytime you have big settlements (plaintiffs) lawyers start to lick their chops.”
InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected]