Defense Costs Owed under Media Liability Coverage

The Appellate Court of Illinois for the First District, applying New York law due to a choice of law provision, held that Certain Underwriters at Lloyd’s London (“Lloyd’s”) had an obligation to pay for defense expenses for its insured, a technology company, in an underlying lawsuit that alleged the insured violated the Illinois Biometric Information Privacy Act (“BIPA”) by unlawfully collecting fingerprint data as part of a railroad’s security gate system.   

The underlying disputes arose from a truck driver who filed two class action lawsuits alleging violations of BIPA. The first class action suit was against BNSF Railway Company (“BNSF”), and it was alleged that BNSF violated BIPA by negligently or recklessly collecting biometric information from truck drivers. Remprex was not named as a defendant in the BNSF suit, but because it contracted with BNSF to provide automated gate services at BNSF facilities, Remprex was subpoenaed for documents, and some of its officers were deposed. Remprex was named as a defendant in the second BIPA class action suit against CN Transportation, an affiliate of the Canadian National Railway Company (“CN”).  

Remprex sought coverage from Lloyd’s under the data and network liability and the media liability provisions of a Beazley Breach Response policy underwritten by Lloyd’s for costs it incurred in defending the two BIPA class action suits. The crux of the coverage dispute was whether the alleged BIPA violations, as outlined in the class action suits, triggered Lloyd’s media liability or data and network liability coverage. The data & network liability section of the policy provides coverage for damages and claims expenses for a data breach, a security breach, or failure by the Insured to comply with specific provisions of a privacy policy.  The media liability section of the policy provides coverage for damages and claims expenses for media liability.  “[M]edia liability” is defined to include one or more enumerated acts committed by or on behalf of the insured in the course of creating, displaying, broadcasting, disseminating, or releasing media material to the public. Because Remprex was not named in the BNSF class action suit, the Appellate Court held that Lloyd’s did not have a duty to defend Remprex under either the data & network liability coverage or the media liability coverage. 

Regarding the CN lawsuit, the Appellate Court ruled that coverage was not owed under the portion of the media liability section applying to the dissemination of material to the public. The Appellate Court reasoned that collecting truck drivers’ fingerprints and disseminating them to the counterparty of the agreement to collect such information was not equivalent to disseminating the fingerprints to the public.  

However, the media liability section of the policy also provided coverage for violating a right to an individual’s right to privacy during the “course of creating media material.” The Appellate Court noted that the policy exclusion for losses arising from the unlawful collection of personally identifiable information on behalf of the insured was also applicable. Ultimately, the Appellate Court concluded an exception to that exclusion, which provides the exclusion does not apply to claims expenses incurred in defending the insured against allegations of the unlawful collection of personally identifiable information. Thus, the exception to the policy exclusion outlined exactly what Remprex was accused of doing: unlawfully collecting the plaintiffs’ fingerprints. The Appellate Court concluded that the trial erred and that Remprex was entitled to coverage for its claims expenses incurred in defending against the CN lawsuit under the policy’s media liability provision.  

The Appellate Court held no coverage for Remprex under the data & network liability coverage of the policy because that coverage appeared to apply primarily to third-party breaches of the insured’s computer systems that in turn expose the stored personal information to unauthorized persons, which is not alleged in the CN lawsuit. Remprex, LLC v. Certain Underwriters at Lloyd’s London, 2023 IL App. (1st) 211097 (Apr. 17, 2023).