A federal judge has ruled an insurance company must provide coverage to an information technology vendor connected to Clearview AI, the facial recognition database firm defending itself in a litany of class action lawsuits connected to alleged violations of Illinois' biometrics privacy law.
Citizens Insurance Company of America initially asked U.S. District Judge John Z. Lee to issue a declaratory judgment asserting it doesn’t need to defend or indemnify Mokena-based Wynndalco Enterprises in connection with two class action suits pending in other courts.
In January 2021, Lee denied a request for a stay on that motion from Wynndalco executives David Andalcio and Jose Flores, after which they filed a counterclaim. Citizens and Wynndalco then filed cross motions for judgement on the pleadings, which Lee addressed in an opinion issued March 30.
Chicago law firm Miller Shakman Levine & Feldman is behind class actions in Cook County Circuit Court under the Illinois Biometrics Information Privacy Act naming New York-based Clearview, which scrapes images from public websites to create facial recognition databases marketed nationwide to law enforcement agencies, banks and loss prevention specialists. Wynndalco, a defendant in two such lawsuits, is licensed to sell Clearview’s app and database in Illinois.
Presently at issue is the business owners policy Citizens issued to Wynndalco effective for a year starting Oct. 2, 2019. Lee said the issue is a policy provision excluding liability coverage for federal laws like the Telephone Consumer Protection Act and Fair Credit Reporting Act, as well as “Any other laws, statutes, ordinances, or regulations, that address, prohibit, or limit the printing, dissemination, disposal, collecting, recording, sending, transmitting, communicating or distribution of material or information.”
Wynndalco faces allegations about how Clearview customers access its database through the company’s software. Lee said the complaints allege BIPA violations for failing to adhere to requirements for collecting, storing and using personal information, as well as for improperly profiting from such data.
Citizens said there is no ambiguity, that BIPA is a statute that qualifies for the exemption. But Lee cited a May Illinois Supreme Court opinion in West Bend Mutual Insurance v. Krishna Schaumburg Tan holding “a nearly identical provision was ambiguous.” That holding is binding, Lee said, because Citizens failed to show how its policy is any different from the one in West Bend.
“In a literal sense, it is true that BIPA, like the other enumerated statutes, ‘regulates the dissemination, disposal, collecting, recording, sending, transmitting, communicating or distribution of . . . information.’ ” Lee wrote. “But as Wynndalco observes, reading the exclusion in this way would swallow the rule.”
Lee further said the policy explicitly provides coverage for allegations of slander, libel, false advertising and copyright infringement, all of which are tied to specific state laws. Allowing the statutory exclusion to exempt Citizens from providing coverage for lawsuits the policy clearly exists to address is “nonsensical,” Lee said.
Lee also rejected Citizens’ attempt to equate BIPA with federal laws, saying the cited statutes don’t all protect against disclosure of personal information. Some address privacy in terms of freedom from intrusion, such as unwanted faxes, while others — such as BIPA — regulate handing of private data.
Determining the policy’s statutory violation exclusion to be “intractably ambiguous,” Lee said Citizens failed to “rebut Wynndalco’s initial showing coverage” and the company therefore has a duty to defend Wynndalco in this litigation.
Wynndalco is represented by attorneys Karin O’Connell and Emily Wessel Farr, of the firm of Gould & Ratner, of Chicago.
Citizens Insurance is represented by attorneys Jeffrey A. Goldwater and Kelly M. Ognibene, of the firm of Lewis Brisbois Bisgaard & Smith, of Chicago.