(Article from Insurance Law Alert, April 2022)
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Another Illinois court has ruled that a statutory violations exclusion does not bar coverage for claims alleging violations of the Biometric Information Privacy Act (“BIPA”).
Last year, the Illinois Supreme Court ruled that an insurer must defend a suit alleging BIPA violations, finding that a violation of statutes exclusion did not apply. West Bend Mutual Ins. Co. v. Krishna Schaumburg Tan, Inc., 2021 WL 2005464 (Ill. May 20, 2021) (discussed in our May 2021 Alert). In that case, the exclusion specifically referenced two statutes, the TCPA and the CAN-SPAM Act of 2003, and also included a “catch-all” provision that applied to “any statute, ordinance or regulation” that prohibits or limits the distribution of material or information. The Illinois Supreme Court reasoned the catch-all provision applied only to statutes that regulate methods of communication (such as telephone calls, emails or faxes) and did not extend to BIPA, which regulates the collection of certain personal data.
Last month, an Illinois district court addressed the same issue and reached the same conclusion in a case involving a policy with slightly different language. In Citizens Ins. Co. of Am. v. Thermoflex Waukegan, LLC, 2022 WL 602534 (N.D. Ill. Mar. 1, 2022), the exclusion listed three statutes: the TPCA, the CAN-SPAM Act of 2003 and the FCRA. Additionally, the catch-all provision in the exclusion contained “somewhat broader” language than that presented in West Bend. Nonetheless, the court ruled that BIPA claims did not unambiguously fall within the exclusion. (See March 2022 Alert).
More recently, another Illinois district court, faced with the nearly identical policy language to that at issue in Thermoflex, ruled that the exclusion was ambiguous and did not bar coverage for alleged BIPA violations. Citizens Ins. Co. of Am. v. Wynndalco Enterprises, LLC, 2022 WL 952534 (N.D. Ill. Mar. 30, 2022). There, the court acknowledged that the “BIPA, like the other enumerated statutes, ‘regulates the dissemination, disposal, collecting, recording, sending, transmitting, communicating or distribution of . . . information.’” However, it reasoned that to construe the exclusion to cover BIPA claims based on the BIPA’s regulation of information would make certain coverage provisions illusory because “most statutes ‘regulate information’ to some degree.” In so ruling, the court expressly disagreed with Massachusetts Bay Ins. Co. v. Impact Fulfillment Services, LLC, 2021 WL 4392061 (M.D.N.C. Sept. 24, 2021) (discussed in our October 2021 Alert), in which the court ruled that a nearly identical exclusion applied to BIPA claims.