By: Mary T. Yong
The Illinois First District Appellate Court recently issued a ruling in National Fire Insurance Company of Hartford and Continental Insurance Company v. Visual Pak Company, Inc. that clarified coverage issues in favor of insurers denying coverage related to claims brought pursuant to the Illinois Biometric Privacy Act (“BIPA”) 740 ILCS 14/15 (West 2016). In doing so, it directly and thoroughly distinguished a Seventh Circuit opinion concerning identical policy provisions in Citizens Insurance Co. of America v. Wynndalco Enterprises, LLC, 70 F.4th 987, 997 (7th Cir. 2023).
Visual Pak required temp agency staffers to clock in and out for work using fingerprint scans and found itself subject to a class action lawsuit under BIPA. It turned to several of its insurers, including Plaintiffs National Fire Insurance Company of Hartford, which held a general liability policy, and Continental Insurance Company, which held an excess/umbrella policy, for coverage of these claims. While Plaintiffs denied coverage, Visual Pak was defended and indemnified through a third policy that covered employment practices. Visual Pak entered into a settlement in the class action and assigned its claims against Plaintiffs National Fire Insurance Company of Hartford and Continental Insurance Company.
Plaintiffs filed suit seeking a declaration that they did not owe a defense or indemnification to Visual Pak for the BIPA claims. When presented with a motion for summary judgment from these Plaintiffs, the trial court initially ruled that there was a question of fact as to whether Visual Pak was entitled to coverage. However, the court then reversed itself on reconsideration.
On appeal, the First District found that the BIPA claims constituted “advertising and personal injury” related to “oral or written publication, in any manner, of material that violates a person’s right of privacy.” Therefore, there was coverage under Plaintiffs’ policies. However, analyzing the policies further, Plaintiffs’ “violation of law” exclusion applied.
Plaintiffs’ “violation of law” exclusion specifically referred to violations of the Telephone Consumer Protection Act (“TCPA”), the CAN-SPAM Act of 2003, The Fair Credit Reporting Act (“FCRA”) and “any federal, state or local statute, ordinance or regulation, other than the TCPA, CAN-SPAM Act of 2003 or FCRA and their amendments and additions, that addresses, prohibits, or limits the printing, dissemination, disposal, collecting, recording, sending, transmitting, communicating or distribution of material or information.“
BIPA was not specifically referred to in the “catch all” provision of the exclusion, but the First District held that the “violation of law” exclusions did exclude coverage for BIPA claims. BIPA, and the specific acts cited in the exclusion, all pertain to the protection of personal privacy interests. Moreover, the “catch all” provision clearly describes BIPA in substance.
As was noted in the opinion, this is a clear departure from the Seventh Circuit’s treatment of an identical “violation of law” exclusion in Citizens Insurance Co. of America v. Wynndalco Enterprises where the Seventh Circuit went so far as to determine that the same “catch all” provision “swallowed” the coverage and was ambiguous, requiring it to find in favor of the insured. The First District disagreed, and clarified, that this “violation of law” exclusion did not swallow or nullify coverage. It only pertained to the specific acts or laws cited and did not exclude coverage for common law invasion of privacy.