2020 IL App (1st) 191834
Ill. App. Ct.2021Background
- West Bend issued two consecutive businessowners liability policies to Krishna Schaumburg Tan, Inc.; policies cover "personal injury" including "oral or written publication of material that violates a person’s right of privacy."
- Policies contain an exclusion titled for statutes governing e‑mails, faxes, phone calls (listing the TCPA and CAN‑SPAM) barring coverage for injuries "arising out of" violations of statutes that govern methods of sending material.
- The 2015–16 policy included an "Illinois Data Compromise Coverage" endorsement covering "personal data compromise" (loss/theft/accidental release or disposal without safeguards) but requires the failure to use safeguards be "accidental, not reckless or deliberate."
- Sekura sued Krishna under the Illinois Biometric Information Privacy Act (BIPA), alleging Krishna disclosed her fingerprint data to third‑party SunLync without consent; claims sought statutory damages, injunction, restitution, and emotional‑harm damages.
- West Bend defended Krishna under a reservation of rights and sued declaratory judgment denying duty to defend/indemnify; the trial court granted summary judgment holding West Bend had a duty to defend (personal‑injury/publication) and that the statutes exclusion did not apply; it denied Krishna’s request for section 155 damages for bad faith.
- On appeal the court affirmed: (1) disclosure to a single third party can qualify as "publication" triggering personal‑injury coverage; (2) the statutes exclusion is limited to statutes regulating communication methods and thus does not bar BIPA‑based claims; and (3) section 155 relief was improper because a bona fide coverage dispute existed (over the data compromise endorsement).
Issues
| Issue | Plaintiff's Argument (West Bend) | Defendant's Argument (Krishna/Sekura) | Held |
|---|---|---|---|
| Whether the underlying complaint alleges a "personal injury" by "publication" | "Publication" requires communication to the public or multiple recipients; a single third‑party disclosure is not publication | Disclosure to a third party (SunLync) fits the ordinary meaning of "publication" and thus potentially triggers personal‑injury coverage | Held for defendants: "publication" includes disclosure to a single third party; duty to defend exists |
| Whether the "Violation of Statutes" exclusion bars coverage for BIPA claims | BIPA "prohibits or limits the sending/transmitting of information," so exclusion applies and bars coverage | Exclusion targets statutes that govern methods of communication (TCPA, CAN‑SPAM); BIPA regulates biometric data handling, not communication methods | Held for defendants: exclusion does not apply to BIPA; coverage not barred |
| Whether the Data Compromise endorsement provides coverage for Sekura's claim | Endorsement does not apply because alleged conduct was intentional/foreseeable and not an "accidental" disposal or release | Endorsement could apply because disclosure/disposal without safeguards is a "personal data compromise" and alleged failures could be accidental | Court did not decide for duty to defend (unnecessary); on cross‑appeal found a bona fide dispute over endorsement applicability |
| Whether Krishna is entitled to section 155 damages for vexatious/unreasonable denial of coverage | West Bend: no; its defenses were bona fide and not vexatious | Krishna: West Bend acted unreasonably and should pay fees/damages under 215 ILCS 5/155 | Held for West Bend: denied. A bona fide coverage dispute (re: endorsement) precludes section 155 relief |
Key Cases Cited
- Valley Forge Ins. Co. v. Swiderski Electronics, Inc., 223 Ill. 2d 352 (discussed plain meaning of "publication" in insurance privacy/advertising‑injury clauses)
- Outboard Marine Corp. v. Liberty Mut. Ins. Co., 154 Ill. 2d 90 (endorsed use of dictionary/plain meaning for undefined policy terms)
- Gillen v. State Farm Mut. Auto. Ins. Co., 215 Ill. 2d 381 (undefined policy terms receive their plain, ordinary meaning)
- Founders Ins. Co. v. Munoz, 237 Ill. 2d 424 (contract‑interpretation principles apply to insurance policies)
- Travelers Ins. Co. v. Eljer Mfg., Inc., 197 Ill. 2d 278 (policy interpretation is a question of law reviewed de novo)
- Virginia Sur. Co. v. N. Ins. Co. of N.Y., 224 Ill. 2d 550 (summary judgment standard reiterated for insurance coverage suits)
- Aetna Cas. & Sur. Co. v. Freyer, 89 Ill. App. 3d 617 (definition of "accident" as an unforeseen occurrence)