588 F.Supp.3d 845
N.D. Ill.2022Background:
- Citizens and Hanover issued commercial and excess/umbrella policies to Thermoflex that cover “personal and advertising injury,” including publication that violates a person’s right of privacy.
- Gregory Gates sued Thermoflex in Illinois state court as a putative class under the Illinois Biometric Information Privacy Act (BIPA), alleging Thermoflex collected employees’ handprints for timekeeping/authentication.
- Thermoflex sought defense and indemnity; the insurers denied coverage and sued for declaratory relief that they owe no defense/indemnity; Thermoflex counterclaimed for a declaration of duty to defend and breach for refusing defense.
- Parties filed cross motions for judgment on the pleadings limited to the duty-to-defend/declaratory issues; the underlying state-court liability has not been determined.
- The central legal questions were whether the Gates BIPA claims are potentially covered as privacy injuries and whether several policy exclusions (employment-related practices; recording/distribution statutes; access/disclosure of confidential information) unambiguously bar coverage.
Issues:
| Issue | Plaintiffs' Argument | Defendant's Argument | Held |
|---|---|---|---|
| Duty to defend (general) | Insurers: exclusions remove coverage so no duty to defend | Thermoflex: Gates alleges privacy/publication (BIPA) claims that are at least potentially covered | Court: complaint arguably alleges covered privacy injury; insurers have duty to defend |
| Employment-related-practices exclusion | Insurers: BIPA suit is employment-related and falls within exclusion | Thermoflex: BIPA is a general privacy statute, not an employment-practices claim | Court: exclusion ambiguous as applied; ambiguity resolved for insured; exclusion does not unambiguously bar defense |
| Recording/distribution (statute-based) exclusion | Insurers: catch-all paragraph (other statutes addressing dissemination/collection) excludes BIPA claims | Thermoflex: apply ejusdem generis; BIPA is not of same kind as TCPA/CAN-SPAM/FCRA and should not be swept in | Court: similarity unclear; ejusdem generis renders exclusion ambiguous; construed in favor of coverage |
| Access/disclosure exclusion & indemnity ripeness | Insurers: exclusion bars coverage because Gates alleges access/disclosure of biometric info; insurers also seek declaration of no indemnity | Thermoflex: biometric identifiers differ from listed confidential categories; indemnity issue premature until liability | Court: noscitur a sociis makes exclusion ambiguous re biometrics; defense duty remains; indemnity issue unripe and dismissed without prejudice |
Key Cases Cited
- Gen. Agents Ins. Co. of Am. v. Midwest Sporting Goods Co., 828 N.E.2d 1092 (Ill. 2005) (insurer’s duty to defend is broader than duty to indemnify)
- Pipefitters Welfare Educ. Fund v. Westchester Fire Ins. Co., 976 F.2d 1037 (7th Cir. 1992) (complaint that is even potentially within coverage obligates defense)
- U.S. Fid. & Guar. Co. v. Wilkin Insulation Co., 578 N.E.2d 926 (Ill. 1991) (ambiguities in insurance policies are resolved in favor of the insured for duty-to-defend analysis)
- Rosenbach v. Six Flags Ent. Corp., 129 N.E.3d 1197 (Ill. 2019) (BIPA recognizes a statutory privacy right in biometric identifiers)
- Bankers Trust Co. v. Old Republic Ins. Co., 959 F.2d 677 (7th Cir. 1992) (duty to indemnify generally unripe until insured is held liable; exceptions require sufficient probability)
- Lear Corp. v. Johnson Elec. Holdings Ltd., 353 F.3d 580 (7th Cir. 2003) (declarations about contingent indemnification risks being advisory)
- Gillen v. State Farm Mut. Auto. Ins. Co., 830 N.E.2d 575 (Ill. 2005) (policy exclusions read narrowly and applied only where clear and specific)
- Panfil v. Nautilus Ins. Co., 799 F.3d 716 (7th Cir. 2015) (definition and treatment of ambiguity in insurance-contract interpretation)