631 F.Supp.3d 503
N.D. Ill.2022Background
- Cheese Merchants of America used a biometric hand-scan timekeeping system; former employee Zack Wypych sued in Illinois state court under the Biometric Information Privacy Act (BIPA).
- Continental Western Insurance issued Cheese Merchants commercial general liability and umbrella policies (2015–2018) and filed this federal declaratory-judgment action denying a duty to defend.
- Continental Western moved for judgment on the pleadings, invoking three policy exclusions: (1) employment-related practices; (2) access or disclosure of confidential or personal information; and (3) recording/distribution in violation of law (a "violation of law" exclusion).
- Court treated pleadings as true for the Rule 12(c) standard and applied Illinois contract/insurance interpretation rules (ambiguities construed for insured).
- The court held the employment-related-practices exclusion does not unambiguously bar coverage; but the access/disclosure exclusion and the violation-of-law exclusion do apply to the BIPA claims. The insurer therefore has no duty to defend and Cheese Merchants’ counterclaims fail.
Issues
| Issue | Plaintiff's Argument (Continental Western) | Defendant's Argument (Cheese Merchants) | Held |
|---|---|---|---|
| Whether the employment-related-practices exclusion bars coverage for BIPA claim | BIPA suit arises from an employment-related practice (timekeeping) and is excluded | BIPA claims are not the kind of individualized mistreatment the exclusion targets; clock-in systems differ from listed examples | Not barred — exclusion ambiguous/unfit to cover BIPA; tie to insured resolves doubt in favor of coverage |
| Whether the access-or-disclosure-of-confidential-or-personal-information exclusion bars coverage | Biometric hand scans are nonpublic personal information; BIPA alleges unlawful collection/access so exclusion applies | The exclusion targets data-breach/commercial secrets and should be limited to those contexts | Barred — biometric data is "personal information" and the exclusion’s broad text covers Wypych’s claims |
| Whether the recording-and-distribution-in-violation-of-law (violation-of-law) exclusion bars coverage for BIPA | The catch-all subpart covers statutes that "address, prohibit, or limit" collecting/recording of information, so BIPA fits | West Bend (Ill. Sup. Ct.) interpreted a similar exclusion narrowly to exclude BIPA; ejusdem generis limits the clause to communications statutes | Barred — court predicts Illinois Supreme Court would distinguish West Bend and apply the broader text (including FCRA) so exclusion covers BIPA |
| Whether Cheese Merchants’ counterclaims (duty to defend; breach) survive | N/A (counterclaims seek defense and breach) | N/A | Dismissed — because insurer has no duty to defend under the two applicable exclusions, counterclaims fail |
Key Cases Cited
- West Bend Mut. Ins. Co. v. Krishna Schaumburg Tan, Inc., 183 N.E.3d 47 (Ill. 2021) (Illinois Supreme Court construed a similar violation-of-statutes exclusion and held it did not apply to BIPA)
- Hobbs v. Hartford Ins. Co. of the Midwest, 823 N.E.2d 561 (Ill. 2005) (insurance policies are contracts; interpret to give effect to parties’ intent)
- Country Mut. Ins. Co. v. Livorsi Marine, Inc., 856 N.E.2d 338 (Ill. 2006) (policy provisions must be read as a whole; plain meaning governs unless ambiguous)
- Zurich Am. Ins. Co. v. Ocwen Fin. Corp., 990 F.3d 1073 (7th Cir. 2021) (exclusions construed narrowly and ambiguities resolved for insured)