102 F.4th 438
7th Cir.2024Background
- Thermoflex Waukegan LLC required employees to use handprints to clock in and out, allegedly without written consent and using a third party for data processing.
- Workers filed a class action in state court alleging violations of the Illinois Biometric Information Privacy Act (BIPA).
- Thermoflex had three insurance policies with Mitsui Sumitomo Insurance: Basic, Excess, and Umbrella, and sought defense and indemnification for the BIPA lawsuit.
- Mitsui denied coverage, leading Thermoflex to sue in federal district court under diversity jurisdiction for declaratory relief about Mitsui’s duty to defend.
- The district court ruled in favor of Mitsui on the Basic and Excess policies due to exclusions, but found Mitsui had a duty to defend under the Umbrella policy.
- The Seventh Circuit reviewed these rulings on appeal.
Issues
| Issue | Thermoflex's Argument | Mitsui's Argument | Held |
|---|---|---|---|
| Whether the Basic policy covers BIPA claims given its exclusion for confidential/personal info | Exclusion is ambiguous due to including "patents" (which are public), so should be construed for coverage | Exclusion plainly covers biometric information; unambiguous policy language controls | Exclusion is unambiguous; no coverage under Basic policy |
| Whether the Excess policy covers BIPA claims | Exclusion doesn't clearly bar BIPA coverage | Follows Basic policy exclusions, so no coverage | No coverage; follows Basic policy exclusions |
| Whether the Umbrella policy's statutory, data breach, or ERP exclusions bar coverage for BIPA claims | Exclusions are ambiguous or inapplicable to BIPA; should cover and defend | Exclusions should bar BIPA coverage as similar to named statutes or "employment-related" | None of the three exclusions clearly bar coverage; Mitsui must defend under Umbrella policy |
| Whether the duty to defend under the Umbrella policy is triggered before exhaustion of underlying insurance | No extra argument; accepts district court's exhaustion proviso | Duty only arises after exhaustion of other applicable policies | Duty to defend arises after exhaustion of other policy limits and deductibles |
Key Cases Cited
- Sanders v. Illinois Union Insurance Co., 2019 IL 124565 (Illinois enforces clear, unambiguous insurance contract language)
- Citizens Insurance Co. v. Wynndalco, 70 F.4th 987 (7th Cir. 2023) (analyzed policy exclusions' applicability to BIPA, though later questioned)
- National Fire Insurance Co. v. Visual Pak Co., 2023 IL App (1st) 221160 (Illinois appellate court held certain exclusions do bar BIPA coverage)
- West Bend Mutual Insurance Co. v. Krishna Schaumburg Tan, Inc., 2021 IL 125978 (Illinois Supreme Court found similar exclusions ambiguous regarding BIPA)
- Rich v. Principal Life Insurance Co., 226 Ill. 2d 359 (Ambiguous insurance provisions construed in favor of coverage)
- Lear Corp. v. Johnson Electric Holdings Ltd., 353 F.3d 580 (7th Cir. 2003) (duty to indemnify not ripe until underlying suit resolved)