Illinois Appeals Ct., Thumbing Nose at 7th Circuit, Holds Exclusion Bars BIPA Claims

An Illinois appellate court decided Tuesday that a general liability insurance policy sold to a Waukegan packaging company clearly excluded coverage for violations of the state Biometric Information Privacy Act, saying a federal appellate court decision to the contrary was wrongly decided.

A panel of the the Illinois 1st District Appellate Court affirmed a trial court ruling in favor of National Fire Insurance Co. of Hartford. The CNA unit had denied a claim by policyholder Visual Pak Co. that sought indemnification for BIPA claims filed by employees who were fingerprinted each time they logged in and out of work.

The decision, if it stands, would save insurers that have the right policy exclusions from significant exposure. Lawsuits that allege biometric privacy violations can be rewarded with big verdicts thanks to an Illinois Supreme Court ruling in February that separate claims occur each time an inappropriate biometric scan is made.

Tae Andrews, a policyholder attorney in New York City, said that the Visual Pak case involved 13,000 class-action plaintiffs and a $19.5 million settlement.

“That isn’t even a high-end one of these,” said Andrews, a senior management associate for the Pasich law firm. “Some of these are in the hundreds of millions of dollars.”

The 1st District appellate panel was asked to review Cook County Circuit Court Judge Thaddeus L. Wilson’s decision to grant summary judgment in favor of National Fire. The insurer had asked for a declaratory judgment that the packaging company and Elite Staffing, which provided temporary workers, violated the privacy rights of employees by using their fingerprints on the machines used to clock in and out of work.

Visual Pak argued that Wilson’s ruling conflicted with a 2021 Illinois Supreme Court decision that found a similar policy exclusion was ambiguous and did not apply.

The panel’s opinion says the violation-of-law exclusion in the policy written by National Fire was broader than the exclusion in the case decided by the Supreme Court.

The opinion noted that both Illinois state courts and federal courts interpreting Illinois law have been divided on the question of whether violation-of-law exclusions apply to BIPA claims. In fact, Judge Wilson first ruled against National Fire but later recanted, granted the insurer’s motion for reconsideration, and then issued a new opinion finding the exclusion barred coverage.

The Illinois 1st District panel said it was not persuaded by the 7th Circuit Court of Appeals June 15 decision in Citizens Insurance Co. of America v. Wynndalco Enterprises, which found that a policy exclusion “nearly identical” to National Fire’s was ambiguous because it was written so broadly it eliminated much of the coverage offered by the policy.

State courts are not bound by federal courts’ interpretation of state law. The 1st District panel said a reasonable policyholder would understand that the National Fire policy BIPA claims from coverage.

“We cannot agree with the Seventh Circuit’s analysis,” the opinion says. “We do not find it to be an accurate reflection of Illinois law.”

Andrews said the stakes are so large in BIPA cases that insurers and insureds are poring over every word in insurance policies to find arguments as to whether coverage is available. The wording of exclusions is crucial. He said he frequently represents policyholders with policies that use the same language as the National Fire policy, but there are also other policies that have similar, but different, language.

“Every single word matters,” he said.