On March 8, 2022, the Northern District of Illinois issued an opinion in State Auto. Mut. Insur. Co. v. Tony’s Finer Foods Enter., Inc., et al., 20-CV-6199, 2022 WL 683688 (N.D. Ill. Mar. 8, 2022) again addressing whether insurance coverage existed for an employer with respect to its employee’s claims of violations of the Illinois Biometric Information Privacy Act (“BIPA”), 40 ILCS 14/1 et seq. The Northern District of Illinois previously addressed similar issues but rendered differing opinions in Am. Family Mut. Ins. Co., S.I. v. Caremel, Inc., 20 C 637, 2020 WL 8093501 (N.D. Ill. Jan. 7, 2022) and Citizens Insur. Co of Am., & Hanover Insur. Co. v. Thermoflex Waukegan, LLC, 20-CV-05980, 2022 WL 602534 (N.D. Ill. Mar. 1, 2022).
In Tony’s, a former employee filed a class action against her former employer in Illinois state court in 2018, alleging that they collected her fingerprints in violation of BIPA. Her fingerprints were taken when she was hired and were subsequently used to clock in and out of work. Her employer notified their broker of the BIPA class action, but their broker did not immediately notify the insurer until approximately a year later. Relying on the Employment-Related Practices (“ERP”) and late notice, the insurer denied coverage and filed a declaratory action in the Northern District of Illinois seeking confirmation that it had no duty to defend its insured for the BIPA class action.
The ERP Exclusion at issue precluded coverage for “personal and advertising injury to (1) A person arising out of any: (a) Refusal to employ that person; (b) Termination of that person’s employment; or (c) Employment-related practices, policies, acts or omissions, such as coercion, demotion, evaluation, reassignment, discipline, defamation, harassment, humiliation or discrimination directed at that person; . . . .” In interpreting the ERP Exclusion, the court held that “[w]hen there is a list, the individual components of the list should be read together. That is, the collection of words helps to inform the meaning of any individual word.” Here, the court held that the first two subparts dealt with the “comings and goings of employees.” Based on the context of those two subparts, the court concluded that the third subpart only applies to adverse employment actions and not just any claims that happen at work. The court reasoned that “[t]he structure of the language suggests that it requires a change in employment status or other negative treatment directed at the employee.” The court further explains that the phrase “such as coercion, demotion, evaluation, reassignment, discipline, defamation, harassment, humiliation or discrimination directed at that person” suggests “a change in an employee’s standing, or targeted mistreatment of a specific person – that is, conduct “directed at that person.” Based on this interpretation, the court concluded that using an employee’s fingerprint to clock in and out of work was an “awkward fit” under this provision. Thus, the court concluded that the ERP Exclusion did not apply to preclude coverage.
With respect to the insurer’s second argument, the court held that whether the insured provided timely notice to its insurer is a question of fact for the jury to decide. The court noted that the insurer did not receive notice of the BIPA class action until approximately a year later; however, the insured argued that the insurer did not suffer any prejudice because the underlying class action has stayed for most of that time. The insurer also argued that the insured was sophisticated enough to act promptly to notify its insurer. The insured on the other hand argued that it acted with diligence because it acted promptly to reach out to its broker when it learned of the Illinois Supreme Court’s ruling in W. Bend Mut. Ins. Co. v. Krishna Schaumburg Tan, Inc., 2021 IL 125978. The court concluded that a jury needed to decide whether the insured provided late notice.
Unlike Citizens, Tony’s did not state that it disagreed with the rationale in Am. Family regarding the applicability of the ERP Exclusion in a similar BIPA lawsuit. Rather, it only noted that Am. Family and Citizens came to different conclusions regarding the applicability of the ERP Exclusion in a BIPA lawsuit. However, given the ruling in Tony’s, an insurer may not be able to rely on the ERP Exclusion to preclude coverage for a BIPA lawsuit filed by an employee.