N.D. Ill. / Noticeshoke2013
No Coverage for Claim Made on Last Day of Policy Period Because Insured Unaware
The United States District Court for the Northern District of Illinois, in an opinion written by Judge Kennelly, applying Illinois law, granted an insurer’s motion for judgment on the pleadings, holding no coverage for a lawsuit alleging Illinois Biometric Information Privacy Act (“BIPA”) violations that was filed on the last day of the policy period because the insured, Lewis Produce Market No. 2, Inc. (“Market 2”), was unaware of the “claim” until after the policy period ended.
Philadelphia Indemnity Insurance Co. (“Philadelphia”) issued two successive liability insurance policies to Market 2, but only the first of the two provided coverage for lawsuits alleging privacy violations under BIPA. The end of the first policy period was at midnight on February 1, 2021.
Lewis Produce Market Inc. (“Market 1”), a distinct Illinois corporation separate from Market 2, but with near identical ownership and operations, was sued late in the day on February 1, 2021, for BIPA violations. Market 2 first learned of the BIPA lawsuit on February 8, 2021, and informed Philadelphia of the “claim or potential claim” on February 19, 2021. On July 16, 2021, the underlying plaintiff amended his complaint and named Market 2 as the sole defendant and dropped Market 1.
The relevant Philadelphia policy provisions include: (1) “[t]he Underwriter shall pay on behalf of the Insured, Loss from Claims made against the Insured during the Policy Period”; (2) Claim is defined to include “a written demand for monetary or non-monetary relief” or “a judicial or civil proceeding commenced by the service of a complaint or similar pleading”; and (3) “[a] Claim shall be considered made when an Insured first receives notice of the Claim.”
Thus, according to the District Court, the claim would be covered by the policy so long as Market 2 received notice of the lawsuit during the coverage period. However, the complaint alleges, undisputed by Market 2, that Market 2 did not receive notice of the lawsuit until February 8, 2021, days after the coverage period ended. Therefore, according to the policy language, the claim was not made until after the policy period. The Court rejected Market 2’s argument that the claim was made during the policy period because it had constructive notice of the lawsuit once it was filed, on February 1, 2020, even if it did not have actual knowledge. The Court explained that such an interpretation would contravene the plain language of the policy. The Court concluded that “the policy means what it says; it requires the insured to ‘receive’ actual notice of the matter giving rise to the claim.” Although the District Court acknowledged the practical difficulties involved when a lawsuit is filed late on the last day of a policy period, it reasoned that the policy should not be interpreted to provide greater coverage than the parties bargained for. As such, the District Court concluded there was no coverage and granted Philadelphia’s motion for judgment on the pleadings. Philadelphia Indem. Ins. Co. v. Lewis Produce Mkt. No. 2 Inc., 2022 WL 1045640 (N.D. Ill. Apr. 7, 2022).