Another Insurer Escapes BIPA Coverage Liability

An Illinois state appeals court has ruled that two Liberty Mutual units are not obligated to provide coverage to a policyholder for an underlying class action lawsuit alleging violations of the state’s Biometric Information Privacy Act (BIPA). This decision adds to the growing body of conflicting precedents regarding insurance coverage for BIPA-related claims, following a series of similar rulings in 2024 that have increasingly limited insurers’ obligations to defend such cases.

The case involved Visual Pak, a company that was sued by a class of employees for alleged BIPA violations stemming from its use of employees’ biometric data provided by a staffing agency. The employees claimed that Visual Pak collected, stored, used, or disseminated their fingerprints without following BIPA’s strict consent requirements, which mandate informed written consent before collecting biometric data and detailed disclosures about data retention and deletion policies.

The Appellate Court of Illinois First Judicial District affirmed a lower court’s ruling that the insurers had no duty to defend Visual Pak in this case. The court’s decision centered on the interpretation of the “Violation of Law” exclusion in the insurance policy. The court determined that the exclusion’s catchall language accurately described BIPA, as it regulates the collection, dissemination, and disposal of biometric identifiers and information. This interpretation is particularly significant given BIPA’s specific requirements for secure storage, transmission using industry-standard encryption, and proper destruction of biometric data.

The ruling stands in notable contrast to previous decisions, including the Illinois Supreme Court’s ruling in West Bend Mutual Insurance Company v. Krishna Schaumburg Tan, Inc., which found that an insurer had a duty to defend its insured against a BIPA lawsuit despite similar exclusionary language. The court distinguished the Visual Pak case by noting that the policy exclusion in West Bend had a broader scope of coverage and lacked specific limitations for laws concerning the “disposal, collecting and recording” of information.

The Visual Pak decision also explicitly rejected the Seventh Circuit’s Wynndalco decision, which had reached the opposite conclusion in a similar case. These conflicting rulings highlight the ongoing uncertainty in the interpretation of insurance policy language regarding BIPA claims and other privacy-related issues. The decision adds to a growing trend of Illinois courts scrutinizing insurance coverage for BIPA violations, as seen in recent rulings involving Lloyd’s of London and Ohio Security Insurance.

Source: Law360

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December 4, 2024 – by the ID Tech Editorial Team