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This Alert is going to be relatively short. Specialized telemarketing insurance policies have been on an upsurge since many courts have ruled telemarketing coverage falls outside of most standard insurance policies, and almost all carriers otherwise started sending out riders excluding telemarketing liability so that you have to buy it as an extra. The problem is very simple: there is no way for an insurance carrier to provide enough coverage to handle a telemarketing class action (the number 1 liability in our industry for 10+ years running) without charging you a fortune because the potential liability exposure is often in the hundreds of thousands, if not millions, of dollars.
So instead, they sell you a policy that often provides very little other than a false sense of security. The biggest issue seems to be that the policy will provide coverage for losses from “mistakes” and “errors” in your telemarketing procedures – but that requires that your operation otherwise needs to be in compliance with state and federal telemarketing laws in the first place.
That’s fine as far as it goes, but if your telemarketing operation was in compliance in the first place, you really are not likely to have any material problems, let alone have to defend a class action. Sure, you are still going to get outlier claims now and then from call center errors such as misprocessed DNC requests and the like, but those can be settled for a strong rebuttal letter and a nuisance payment, usually a few hundred dollars. But if you find yourself on the wrong end of a serious telemarketing class action, it almost always means there was a failure in your lead generation and compliance protocols in the first place, and coverage is likely going to be denied.
Just think about it – what insurer is going to cover you for a multi-million-dollar class action on an insurance policy that cost you $10,000? If you are buying coverage, make sure it provides what you need it to. Either you or your broker must deconstruct the legal definitional gymnastics used in the policy to avoid buying into coverage that won’t do you any good. Otherwise, it is much better to take the necessary steps to ensure no leads come in (not from your marketing or from any lead aggregators – aggregators are the top source of telemarketing class actions in our industry) without ensuring the telemarketing authorization in the lead generation material matches exactly the manner in which you are going to contact the consumer.
Berenson LLP serves as counsel to the remodeling and home improvement industry, providing legal compliance solutions, quality control counseling, litigation defense, and agency representation to industry clients throughout the United States. This client alert is intended to provide general information regarding industry legal issues and developments to our clients and other friends. It should not be construed as legal advice or a legal opinion on any specific facts or situations. For further information on your own situation, we encourage you to contact an attorney at the firm. For more information on the legal solutions provided by Berenson LLP, please contact us by phone at 561.429.4496 or by email at info@berensonLLP.com.
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