2023 IL App (1st) 221160
Ill. App. Ct.2023Background
- National Fire Insurance Company of Hartford and Continental Insurance Company ("CNA plaintiffs") sought a declaration that they did not owe a duty to defend or indemnify Visual Pak Company regarding a Biometric Information Privacy Act (BIPA) lawsuit.
- The underlying BIPA lawsuit alleged that Visual Pak improperly collected, stored, and shared employee fingerprint data in violation of BIPA without proper notice, policy, or consent.
- Visual Pak was defended in the BIPA suit by a different insurer; CNA plaintiffs were not notified (according to them) until two years after the suit's filing, but for summary judgment purposes, the court presumed timely tender.
- The trial court initially ruled insurers were estopped from denying coverage due to delay, but on reconsideration, reversed itself and found a policy exclusion barred coverage, making estoppel moot.
- The main dispute focused on whether a 'violation-of-law' exclusion in the CGL policy applied to BIPA claims, and whether coverage was thus precluded.
- On appeal, the Appellate Court affirmed the reconsidered judgment, holding the exclusion did apply and that estoppel was not triggered as there was no duty to defend.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the policy's "violation-of-law" exclusion bar coverage for BIPA? | Exclusion's broad language encompasses BIPA claims. | Exclusion should be limited, BIPA not included. | Yes, exclusion clearly applies to BIPA claims. |
| Should the Seventh Circuit's contrary ruling in Wynndalco be followed? | Illinois courts are not bound by federal decisions. | Wynndalco better interprets Illinois law, exclusion ambiguous. | No, Seventh Circuit ruling is unpersuasive. |
| Does estoppel preclude the insurer from denying coverage due to delay? | No duty to defend means estoppel never applies. | Estoppel bars insurer from denying coverage after delay. | Estoppel does not apply absent duty to defend. |
| Does the exclusion render coverage "illusory" and thus invalid? | Exclusion is broad but does not eliminate all coverage. | Exclusion swallows coverage; ambiguous, construed for insured. | No, exclusion does not make coverage illusory. |
Key Cases Cited
- West Bend Mut. Ins. Co. v. Krishna Schaumburg Tan, Inc., 183 N.E.3d 47 (Ill. 2021) (holding that a similar violation-of-law exclusion did not apply to BIPA claims due to narrower policy language)
- Pekin Ins. Co. v. Wilson, 930 N.E.2d 1011 (Ill. 2010) (method for deciding motions on the pleadings in insurance coverage disputes)
- Founders Ins. Co. v. Munoz, 930 N.E.2d 999 (Ill. 2010) (insurance contract interpretation from insured’s viewpoint)
- Employers Ins. of Wausau v. Ehlco Liquidating Trust, 708 N.E.2d 1122 (Ill. 1999) (estoppel doctrine in failure-to-defend cases)
- Lawlor v. North American Corp. of Illinois, 983 N.E.2d 414 (Ill. 2012) (common law right to privacy and its causes of action)
- Rich v. Principal Life Insurance Co., 879 N.E.2d 60 (Ill. 2007) (purpose and use of exclusions in insurance policies)