Citizens Insurance Company of America v. Mullins Food Products, Inc.
684 F.Supp.3d 762
N.D. Ill.2023Background
- Galan filed a putative class action under Illinois BIPA alleging Mullins required employees to scan biometric identifiers and disseminated that data to third‑party vendors without written consent. Mullins seeks coverage under three Citizens CGL policies (2015–2018).
- The policies promise coverage for "personal and advertising injury," which includes "publication of material that violates a person’s right of privacy," but also contain three relevant exclusions (Recording/Distribution in Violation of Law; Access/Disclosure of Confidential or Personal Information; Employment Practices Liability).
- Mullins was served with the Galan complaint in March 2021 but did not notify Citizens until January 26, 2022; Citizens denied coverage and filed this declaratory judgment action in March 2022.
- The parties cross‑moved for summary judgment focused on (1) whether the BIPA claim falls within the insuring agreement, (2) whether any of the three exclusions bar coverage, and (3) whether Mullins’ notice was untimely.
- The court concluded the Galan complaint falls within or potentially within the policies’ personal-and-advertising‑injury grant, found the three invoked exclusions ambiguous and therefore inapplicable, found a material factual dispute as to whether notice was given reasonably, and held that Citizens did not breach the duty to defend by promptly filing for declaratory judgment.
Issues
| Issue | Plaintiff's Argument (Citizens) | Defendant's Argument (Mullins) | Held |
|---|---|---|---|
| Whether BIPA claim falls within the insuring agreement | BIPA claims do not allege a covered "publication" or privacy injury under policy language | BIPA allegations (dissemination of biometric info) potentially allege publication and privacy injury | Covered or potentially covered — duty to defend attaches unless excluded |
| Recording/Distribution in Violation of Law exclusion | The catch‑all clause (any statute addressing dissemination) plainly excludes BIPA claims | Exclusion ambiguous and cannot be read to negate the policy’s express privacy‑publication coverage | Exclusion ambiguous; does not bar coverage (Wynndalco controlling) |
| Access/Disclosure of Confidential or Personal Information exclusion | Disclosure of fingerprints/biometrics is ‘‘access/disclosure of personal information’’ and thus excluded | The example list narrows scope; biometric data not clearly within the examples; clause ambiguous | Ambiguous when read with coverage grant; construed for insured and does not bar coverage |
| Employment Practices exclusion | BIPA dissemination is an employment‑related practice and thus excluded | Exclusion targets actions directed personally at an employee (targeted employment actions); BIPA policy was a general practice, not a targeted personnel action | Exclusion does not apply; at minimum ambiguous and resolved for insured |
| Timeliness of notice to insurer | Ten‑month delay (Mar 2021–Jan 2022) is unreasonable as a matter of law and relieves insurer | Mullins relied on brokers’ advice, evolving case law, and corporate decisionmaking; delay may be excused — fact issue | Material factual dispute remains; reasonableness of delay not decided on summary judgment |
| Whether insurer breached duty to defend by denying coverage and filing declaratory action | Citizens’ denial and refusal to defend constituted breach | Citizens promptly filed a declaratory judgment action contesting coverage (permitted option) | Citizens did not breach duty to defend by promptly seeking declaratory relief; Mullins’ breach‑of‑contract claim on duty to defend dismissed |
Key Cases Cited
- Wynndalco Enters., LLC v. Citizens Ins. Co. of Am., 70 F.4th 987 (7th Cir. 2023) (resolves ambiguity in similar exclusion in insured’s favor and controls exclusion analysis)
- W. Bend Mut. Ins. Co. v. Krishna Schaumburg Tan, Inc., 183 N.E.3d 47 (Ill. 2021) (Illinois Supreme Court: BIPA claims potentially allege covered privacy publication)
- Outboard Marine Corp. v. Liberty Mut. Ins. Co., 607 N.E.2d 1204 (Ill. 1992) (policy construction is a question of law)
- Gen. Agents Ins. Co. of Am. v. Midwest Sporting Goods Co., 828 N.E.2d 1092 (Ill. 2005) (duty to defend is broader than duty to indemnify)
- Waste Mgmt., Inc. v. Int’l Surplus Lines Ins. Co., 579 N.E.2d 322 (Ill. 1991) (declaratory action preserves insurer from breach when promptly filed)
- Santa’s Best Craft, LLC v. St. Paul Fire & Marine Ins. Co., 611 F.3d 339 (7th Cir. 2010) (insurer may seek declaratory relief rather than immediately defend)
- Pipefitters Welfare Educ. Fund v. Westchester Fire Ins. Co., 976 F.2d 1037 (7th Cir. 1992) (if underlying complaint potentially within coverage, duty to defend arises)
- Celotex Corp. v. Catrett, 477 U.S. 317 (U.S. 1986) (summary judgment standard)