595 F.Supp.3d 668
N.D. Ill.2022Background
- Wynndalco (an IT firm) licensed and sold access to Clearview AI’s facial-recognition database/app to customers in Illinois.
- Two putative class actions (Thornley and Calderon) allege Wynndalco violated the Illinois Biometric Information Privacy Act (BIPA) by selling/using biometric data (facial scans).
- Wynndalco sought defense under a Business Owners Insurance Policy issued by Citizens; Citizens filed for declaratory judgment denying coverage based on a policy exclusion.
- The Policy covers “personal and advertising injury” (including invasions of privacy) but contains a “Distribution of Material in Violation of Statutes” exclusion covering violations of specified statutes (TCPA, CAN‑SPAM, FCRA, FACTA) and a catchall for other laws that “address… dissemination… of material or information.”
- The central dispute: whether BIPA falls within that catchall exclusion so as to bar Citizens’ duty to defend; both parties moved for judgment on the pleadings under Rule 12(c).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the policy’s Statutory Violation exclusion bar coverage for underlying BIPA claims? | The exclusion plainly covers any statute that regulates dissemination/collection/transmission of information, so BIPA falls within the catchall and precludes coverage. | The exclusion is ambiguous; reading it to reach BIPA would swallow coverage for ordinary privacy‑based claims and is contrary to policy context and canons of construction. | The exclusion is ambiguous as to BIPA; under Illinois law ambiguities resolve for the insured. Citizens has a duty to defend Wynndalco (and its officers). |
Key Cases Cited
- Scottsdale Ins. Co. v. Columbia Ins. Grp., 972 F.3d 915 (7th Cir. 2020) (insurance‑policy interpretation principles)
- Mashallah, Inc. v. W. Bend Mut. Ins. Co., 20 F.4th 311 (7th Cir. 2021) (insurer must clearly establish exclusion to deny defense)
- Founders Ins. Co. v. Munoz, 930 N.E.2d 999 (Ill. 2010) (policy not ambiguous merely because parties disagree)
- American States Ins. Co. v. Capital Assocs. of Jackson Cnty., Inc., 392 F.3d 939 (7th Cir. 2004) (distinguishing types of privacy: seclusion vs. secrecy)
- Mesa Lab’ys, Inc. v. Fed. Ins. Co., 994 F.3d 865 (7th Cir. 2021) (if one claim is covered, insurer must defend entire suit)
- Yates v. United States, 574 U.S. 528 (2015) (ejusdem generis canonical rule)
- S.D. Warren Co. v. Maine Bd. of Envtl. Prot., 547 U.S. 370 (2006) (limits of noscitur a sociis where no common feature)
- Travelers Pers. Ins. Co. v. Edwards, 48 N.E.3d 298 (Ill. App. Ct. 2016) (insured bears initial burden to show coverage; insurer must prove exclusions)