7th Cir. / BIPA Duty to Defendmiqbal
“Catch-All” Statutory Violation Exclusion Ambiguous
The Seventh Circuit, in an opinion by Judge Rovner, applying Illinois law, affirmed the district court’s judgment on the pleadings holding that an insurer had a duty to defend two class action lawsuits alleging violations of the Illinois Biometric Information Privacy Act (“BIPA”). The court determined the language of the catch-all provision of the statutory violation exclusion to be intractably ambiguous, and consequently, the insurer had a duty to defend its insured.
This insurance coverage dispute arose from two class action lawsuits filed against Wynndalco Enterprises, LLC (“Wynndalco”) alleging that it violated BIPA when it licensed and sold to Clearview AI access to Illinois customers, including the Chicago Police Department. Clearview AI is an artificial intelligence firm that creates facial recognition software and has assembled a database of facial-image scans.
Wynndalco sought coverage under the “personal and advertising” provisions of a business liability insurance policy from Citizens Insurance Company of America (“Citizens”). The “personal and advertising injury” provision includes “[o]ral or written publication, in any manner, of material that violates a person’s right of privacy.” Citizens denied coverage for the BIPA claims based on a catch-all provision in an exclusion that precluded coverage for injuries arising from certain statutory violations (the “Statutory Violation exclusion”). The Statutory Violation exclusion included four enumerated statutes and one catch-all provision for acts that violate “[a]ny other laws, statutes, ordinances, or regulations, that address, prohibit, or limit the printing, dissemination, disposal, collecting, recording, sending, transmitting, communicating or distribution of material or information.”
The Seventh Circuit determined that a plain-text reading of the catch-all provision would exclude coverage for injuries resulting from all statutory prohibitions that concern the recording, distribution, and so forth of material and information, which would include BIPA violations because BIPA governs the collection, sale, and transmission of biometric identifiers and information. However, under this interpretation, the exclusion would all but eliminate coverage for certain claims that the policy otherwise explicitly purported to cover under the “personal and advertising injury” provision. Thus, the court concluded the exclusion was ambiguous.
Citizens argued that the enumerated statutes in the Statutory Violation exclusion only applied to causes of action related to privacy, and therefore the catch-all provision should only encompass statutes regulating privacy. This reading would not conflict with the definition of “personal and advertising injury” and would eliminate the ambiguity. The Seventh Circuit, however, noted that the language of the Statutory Violation exclusion’s heading and provisions did not indicate a focus on privacy. Further, the principles of ejusdem generis and noscitur a sociis did not resolve this ambiguity because the text lacked a readily discernible theme.
The Seventh Circuit held that the ambiguity must be construed against Citizen and in favor of the insured, Wynndalco. It concluded that the injuries at least potentially fall within the policy’s coverage, and thus Citizens had a duty to defend Wynndalco against the BIPA complaints. Citizens Ins. Co. of Am. v. Wynndalco Enter., LLC, No. 22-2313, 2023 WL 4004766, (7th Cir. June 15, 2023).