Illinois Court Rules Insurance Companies Not Obligated to Defend in BIPA Lawsuit

The Illinois First District Appellate Court recently made a significant ruling in a case involving the interpretation of Illinois’ Biometric Information Privacy Act (BIPA). The case, National Fire Insurance Company of Hartford and Continental Insurance Company v. Visual Pak Company, Inc. and Luis Sanchez, centered around whether insurance companies were obligated to defend an employer in a BIPA class action lawsuit.

Luis Sanchez, working through a temporary employment agency at Visual Pak, was required to provide a fingerprint scan for an employee database. He alleged BIPA violations, claiming he wasn’t informed about how his biometric data would be used, nor was he provided a release form. Visual Pak, insured by CNA affiliates, faced a legal battle over whether their policies covered defense in this BIPA lawsuit. The insurers, National Fire Insurance and Continental Insurance, argued against this, citing policy exclusions.

Justice David Ellis, presiding over the case, initially sided against the insurers but later reversed this decision. He highlighted a specific catchall exclusion in the policy, affirming that the plaintiffs had no duty to defend Visual Pak under their policy terms.

The decision contrasts with a U.S. Court of Appeals for the Seventh Circuit ruling on a similar case, which found that identical exclusion language did not preclude BIPA lawsuit defense. However, Justice Ellis emphasized that the Illinois appellate court was not bound by federal interpretations of Illinois law.

Industry reactions vary. Sarah Abrams from Bowhead Specialty Underwriters sees the decision as informative for insurers in Illinois, given the high exposure to BIPA claims. Michael J. O’Malley from Wilson Elser Moskowitz Edelman & Dicker LLP agrees with the ruling, expecting the Illinois Supreme Court to affirm this decision. Joel Bruckman from Smith Gambrell Russell notes the potential for forum shopping between state and federal courts due to differing precedents.

This ruling brings to light the complexities of insurance policy interpretations and their exclusions, especially in cases involving privacy statutes like BIPA. It underscores the ongoing legal debates around biometric data use and privacy protections.