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March 7, 2022
By Josh Liberatore | Law360 (March 3, 2022) -- An IT company told an Illinois federal court that in deciding whether Citizens Insurance Co. of America owes it coverage for an underlying BIPA suit, the court should consider its own ruling this week finding that the insurer has to defend an auto accessory company in a similar case.
On Wednesday, Wynndalco Enterprises LLC told Judge John Z. Lee that an exclusion in its business liability policy with Citizens is "nearly identical" to an exclusion in the insurer's policy with Thermoflex. The same court found on Tuesday that the exclusion was inapplicable to violations of the Illinois Biometric Information Privacy Act, Wynndalco said in a notice of supplemental authority.
The exclusion that Judge John F. Kness shot down Tuesday was titled "recording and distribution of material or information in violation of law," while the exclusion in Wynndalco's policy is called "distribution of material in violation of statutes," the IT company said.
Both exclusions identically preclude coverage for violations of the Telephone Consumer Protection Act, the CAN-SPAM Act of 2003, the Fair Credit Reporting Act and the Fair and Accurate Credit Transaction Act, Wynndalco said. According to the company, its policy with Citizens also excludes any other decrees that "address, prohibit or limit the printing, dissemination, disposal, collecting, recording, sending, transmitting, communicating or distribution of material or information."
In the Thermoflex decision, Judge Kness said the laws cited in those exclusions are "not 'of the same kind'" as BIPA. Those other laws such as the TCPA regulate "methods of communication," the judge noted.
The coverage dispute between Wynndalco and Citizens began in May 2020, when the IT company was accused in a proposed class action of intentionally selling access to consumers' biometric data in violation of BIPA.
The proposed class representatives, Melissa Thornley, Deborah Benjamin-Koller and Josue Herrera, claimed that Clearview, a photo-comparison platform, secretly created a database that contained over 3 billion facial scans and then authorized Wynndalco to license or sell access to its app and database to customers based in Illinois.
The consumers sought statutory damages of $5,000 per class member or $1,000 per class member for each violation of BIPA, depending on severity, according to court records.
Citizens sued Wynndalco in July 2020, asking the Illinois federal court to clear it of any duty to defend the IT company, arguing that its policy excludes coverage for any distribution of materials in violation of statutes. The insurer also said Wynndalco failed to show any "bodily injury" or "property damage" covered under the policy, and that the company's alleged BIPA infractions first took place before its policy, which ran from October 2019 to October 2020, was in effect.
Citizens named Thornley, Benjamin-Koller and Herrera in its suit, identifying each of the proposed class representatives as a "necessary party defendant."
In June 2021, Wynndalco told the court that Citizens was relying on an "erroneous" interpretation of the exclusion in its policy. The IT company cited a recent Illinois Supreme Court ruling in West Bend Mutual Insurance Co. v. Krishna Schaumberg Tan Inc., in which the state high court ruled that what Wynndalco described as "an analogous insurance policy exclusion" did not apply to violations of BIPA.
In its motion for judgment on the pleadings, Citizens told the Illinois federal court that the West Bend ruling shouldn't be applied to its policy with Wynndalco because they contain different language.
The exclusion in Citizens' policy with Wynndalco "more broadly includes the terms 'recording,' 'collecting,' 'dissemination' and 'disposal' in the catchall provision,'" the insurer wrote.
Judge Kness' Tuesday ruling seemed to present Citizens with even more damaging precedent than did West Bend, because he ruled that the insurer's exclusion in its policy with Thermoflex, which contains those very same terms, is ineffective to bar coverage for BIPA infractions.
On Wednesday, Wynndalco told Judge Lee that he should give significant weight to his colleague's ruling as he decides whether Citizens should have to defend the IT company from the BIPA class action.
Kelly M. Ognibene, counsel for Citizens in the Wynndalco and Thermoflex actions, said there is reason to believe Judge Lee will reach a different conclusion than did Judge Kness.
"There's a ton of caselaw discussing both the TCPA and the FCRA and how they do concern and regulate privacy interests as does BIPA, so they are similar statutes," Ognibene said. Citizens included those cases in its pleadings to the court, she added.
"We're hopeful that Judge Lee will take that caselaw into account and rule differently," she said.
Counsel for Wynndalco and the underlying BIPA plaintiffs did not immediately respond to requests for comment on Thursday.
Representatives of Wynndalco did not immediately respond to requests for comment. The underlying BIPA plaintiffs couldn't be reached for comment.
Citizens is represented by Ognibene and Jeffrey A. Goldwater of Lewis Brisbois Bisgaard & Smith LLP.
Wynndalco and the underlying BIPA plaintiffs are represented by David S. Golub of Silver Golub & Teitell LLP, by Brian Patrick O'Meara, Kevin Michael Forde and Kevin R. Malloy of Forde & O'Meara LLP and by Daniel Martin Feeney, Rachel Ellen Simon and Zachary J. Freeman of Miller Shakman Levine & Feldman LLP.
The case is Citizens Insurance Co. of America v. Wynndalco Enterprises LLC et al., case number 1:20-cv-03873, in the U.S. District Court for the Northern District of Illinois.
--Additional reporting by Lauraann Wood, Celeste Bott and Daphne Zhang. Editing by Covey Son.