Although the policyholder bar has previously had success obtaining coverage for Biometric Information Privacy Act (BIPA) litigation under an employment practices liability (EPL) policy, insurers recently notched a win by convincing a court to deny EPL coverage for an employee-based BIPA class action. In Church Mutual Insurance Company v. Prairie Village Supportive Living, LLC, the insured’s former employee brought a class action alleging the insured unlawfully collected, used, and disseminated employee biometric identifiers (fingerprints) in violation of BIPA, and the insured sought coverage from its insurer under its general liability (GL) and EPL policies. No. 21 C 3752, 2022 U.S. Dist. LEXIS 143495 (N.D. Ill. Aug. 11, 2022). Based on a unique combination of policy provisions not previously addressed in BIPA coverage litigation, the court declined to find coverage under either policy. Rather than be discouraged from pursuing coverage for BIPA class actions involving employee biometrics, however, there are some important lessons policyholders can glean from this opinion.
The unique terms of the insured’s EPL policy precluded coverage under all policies
The combination of policy terms at issue in Church Mutual was quite unique and does not appear to be typical of those found in most insureds’ policies. As an initial matter, although the insured had purchased both GL and EPL coverage, the EPL coverage form stated: “Except for the insurance provided by this coverage form, the policy to which this coverage form is attached does not apply to any claim or ‘suit’ seeking damages arising out of any ‘wrongful employment practice.’” Right off the bat, therefore, the insured was limited to seeking EPL coverage because it did not dispute that it was seeking coverage for a “wrongful employment practice” as defined in its EPL policy. Any coverage that may have existed under the insured’s GL policy was irrelevant.
After limiting its analysis to whether EPL coverage existed, the court then focused on an exclusion in the EPL policy entitled “Violation of Laws Applicable to Employers.” Pursuant to that exclusion, the policy precluded coverage for, in relevant part:
“Any claim based on, attributable to, or arising out of any violation of any insured’s responsibilities or duties required by any other federal, state, or local statutes, rules, or regulations, and any rules or regulations promulgated therefor or amendments thereto. However this exclusion does not apply to: Title VII of the Civil Rights Act of 1964, the Americans With Disabilities Act, the Age Discrimination in Employment Act, the Equal Pay Act, the Pregnancy Discrimination Act of 1978, the Immigration Reform and Control Act of 1986, the Family and Medical Leave Act of 1993, and the Genetic Information Nondiscrimination Act of 2008 or to any rules or regulations promulgated under any of the foregoing and amendments thereto or any similar provisions of any federal, state, or local law.”
The insured argued that this exclusion did not bar coverage because BIPA is similar to the statutes excepted from the exclusion – i.e., Title VII, the ADA, FMLA, the Genetic Information Nondiscrimination Act of 2008 – and therefore constitutes a “similar provision of any federal, state, or local law.” The court rejected this argument, reasoning that BIPA “would stick out like a sore thumb” if it were added to that list of laws. Those statutes, according to the court, “proscribe discrimination in one form or another and are applicable to (although not limited to) employers,” whereas BIPA, in contrast, “imposes responsibilities on all ‘private entities’—including employers—and ‘regulates the collection, use, storage, and retention of biometric identifiers and information.’” Put simply, because the court found BIPA to be “categorically different than the enumerated exempted statutes,” the exception was inapposite and the exclusion applied to bar coverage.
Insurers are unlikely to successfully deny coverage to most policyholders with GL and EPL coverage
The policy terms on which the Church Mutual opinion turned likely render it of little precedential value for insurers. The first provision of note was that limiting the policyholder solely to EPL coverage for “wrongful employment practices.” In policies without such a provision, insureds subject to employee-based BIPA litigation can and should aggressively pursue GL coverage. Almost inevitably, insurers will deny coverage based on employment related practices (ERP) exclusions that typically exist in GL policies. As outlined in two recent blog posts (I; II), however, courts have correctly and almost unanimously declined to apply ERP exclusions to claims for coverage of BIPA litigation. Based on existing precedent, the policyholder in Church Mutual would have likely succeeded in obtaining GL coverage but for the provision limiting its claim to EPL coverage.
The second provision of note, of course, was the Violation of Laws Applicable to Employers exclusion. It is unclear how often such exclusions are found in EPL policies, but the dearth of case law analyzing them suggests that there are plenty of EPL policies that do not incorporate such exclusions. Where policyholders have EPL coverage that does not contain a Violation of Laws Applicable to Employers exclusion, they should pursue EPL coverage for employee-based BIPA litigation without any discouragement from the Church Mutual opinion. Indeed, in Twin City Fire Ins. Co. v. Vonachen Servs., No. 20-cv-1150-JES-JEH, 2021 U.S. Dist. LEXIS 201174 (C.D. Ill. Oct. 19, 2021), the only other opinion addressing EPL coverage for employee-based BIPA litigation, the court found duty to defend coverage existed for the insured.
If you have any questions about the content of this article or your company’s coverage for BIPA litigation, please contact one of the authors of this article or any other member of Reed Smith’s Insurance Recovery Group.