IT Biz Says 'Catch-All' Exclusion Doesn't Bar BIPA Coverage

June 15, 2021

By Eli Flesch | Law360 (June 14, 2021) -- Illinois-based information technology company Wynndalco Enterprises is pushing back against its insurer's attempt to avoid covering two biometric privacy class actions, saying a policy exclusion cited by the insurer doesn't bar claims made under Illinois' Biometric Information Privacy Act.

An exclusion in the Citizens Insurance Co. policy for violations of statutes involving the dissemination of material doesn't encompass BIPA, Wynndalco Enterprises LLC said in a memorandum Friday, urging an Illinois federal court to reject the insurer's motion for judgment on the pleadings.

Wynndalco argued that none of the specific telecommunications laws named in the exclusion are similar to Illinois' landmark biometric privacy law. And an extra "catch-all" provision in the exclusion, meant to preclude coverage for claims made under statutes not explicitly named, didn't make mention of laws like BIPA that are designed to prevent companies from "profiting" off of biometric data, the company said.

The company said covering "statutory violations that do not involve the types of statutory conduct set forth in the catch-all provision would dramatically expand the scope of the exclusion and impermissibly disregard the Illinois courts' directive to apply exclusions 'narrowly' and only based on 'clear, definite and specific' terms."

Even if the exclusion could be interpreted as covering some BIPA claims related to the dissemination of biometric information, Wynndalco said, it couldn't apply to the class actions at issue because those suits claim the company profited off of the information.

Illinois residents first accused Wynndalco of selling biometric data compiled by facial recognition company Clearview AI Inc. last year. That data was eventually sold to the Chicago Police Department, according to court records. An official responsible for purchasing at Wynndalco told the court last week that Wynndalco was involved in the deal to help facilitate the sale of Clearview's database to the police department.

The residents say Clearview, whose platform allows users to identify someone by comparing a photo against its collection of images scraped from websites, secretly created a database that contained more than 3 billion facial scans.

Under BIPA, employers are required to get informed, written consent from workers before collecting, using and storing their biometric information, such as fingerprints. The law also mandates the development of a written, publicly available policy establishing a data retention schedule and guidelines for permanently destroying the information.

On Friday, Wynndalco argued that because the underlying suits allege that the IT company profited off of the data in contravention of BIPA — and not that it distributed the data — the "catch-all" in the exclusion didn't cover the residents' claims.

It also asserted that it never physically possessed the database and that it was ultimately Clearview that provided the police with the data and its technology.

Citizens filed its motion for judgment in April after bringing the coverage dispute to court in July. It asked the court to find that it owed Wynndalco no coverage for the underlying suits, saying the policy exclusion "clearly" applied to the claims made.

The exclusion applies to personal and advertising injuries arising from violations of the Telephone Consumer Protection Act, CAN-SPAM Act of 2003, Fair Credit Reporting Act or "any other laws, statutes, ordinances or regulations" that govern the collection, printing, recording, transmission and distribution of information, the insurer said.

In January, the Illinois federal judge overseeing the case rejected a request by Wynndalco to halt its case against Citizens while litigation in the underlying suits was ongoing. U.S. District Judge John Z. Lee said he saw no reason to stall the case while those suits were pending.

Clearview has also been at the center of litigation over its business practices. The Judicial Panel on Multidistrict Litigation in December centralized a handful of lawsuits seeking to preliminarily enjoin the company from continuing to collect biometric information.

Representatives for Wynndalco and Citizens did not immediately respond to requests for comment Monday.

Wynndalco is represented by David S. Golub of Silver Golub & Teitell LLP, Daniel M. Feeney, Zachary J. Freeman and Rachel Ellen Simon of Miller Shakman Levine & Feldman LLP, and Kevin M. Forde, Brian P. O'Meara and Kevin R. Malloy of Forde & O'Meara LLP.

Citizens is represented by Kelly M. Ognibene and Jeffrey Alan Goldwater of Lewis Brisbois Bisgaard & Smith LLP.

The case is Citizens Insurance Co. of America v. Wynndalco Enterprises LLC, case number 1:20-cv-03873, in the U.S. District Court for the Northern District of Illinois.

--Additional reporting by Lauraann Wood and Daphne Zhang. Editing by Aaron Pelc.