A federal judge has determined an insurance company can’t use policy exclusions to escape its obligation to fund the legal defense of a supermarket chain engaged in a long-running court fight over allegations the grocer improperly required its workers to scan their fingerprints when punching the clock, allegedly in violation of Illinois' biometrics privacy law.
U.S. District Judge Jorge Alonso issued an opinion July 5 denying summary judgement to Continental Western Insurance while granting it to Tony’s Finer Food Enterprises.
The company — engaged in a similar legal battle with Liberty Mutual enterprise State Automobile Mutual Insurance — operates 16 Chicago area stores and is facing a lawsuit from lead plaintiff Charlene Figueroa, who alleged the retailer violated the Illinois Biometric Information Privacy Act when it required workers to use a fingerprint-scanner time clock to track their work hours.
Lawyers from the firm of Stephan Zouras, of Chicago, are representing Figueroa, as they did in another BIPA class action in which she served as the lead plaintiff against Kronos, a manufacturer of timeclocks, such as those allegedly used by Figueroa while she worked at a Tony's store from March 2017 to September 2018.
As a result, in both cases, Tony's Finer Foods stood at the center of some of the earliest flashpoints in the ever-mounting tide of class action litigation against Illinois employers and the vendors who provide them with important technology.
In the years since Figueroa and her attorneys filed their class actions, thousands of similar class action lawsuits have been filed against employers, with many now resulting in settlements of up to $50 million.
In seeking coverage for its defense against Figueroa's lawsuit, Tony’s said it had a multi-peril commercial lines policy with Continental Western from March 15, 2016, to March 15, 2017, which it contends included commercial general liability coverage of up to $1 million per occurrence and $2 million total. Although Continental Western’s request for summary judgment covered broader arguments, Alonso said the only issues ripe during the parties’ cross motions for summary judgment were three policy exclusions.
The first exclusion addressed “recording and distribution of material or information in violation of law,” Alonso wrote, adding that since the parties filed briefs a 2022 U.S. Seventh Circuit Court of Appeals opinion, Citizens Insurance Company of America v. Wynndalco Enterprises, considered a functionally identical policy from another carrier and found in favor of the client. Reading the policies in favor of the insurers, he said, could practically eliminate insurance coverage for statutory claims, such as intellectual property litigation.
The next exclusion concerned confidential or personal information disclosure. Alonso said multiple courts have ruled in favor of and against insurers on similar questions. But the judge again leaned on Wynndalco as particularly persuasive. He explained this specific exclusion is sufficiently ambiguous — because a broad construction “would eliminate a vast swath of privacy violation claims based on the publication of personal information that the insuring agreement otherwise purports to cover” — to lead to a ruling in favor of the client.
The final exclusion involves employment-related practices. Continental Western said Tony’s use of fingerprint time clocks was a job requirement and therefore not a coverage trigger.
“Several courts in this district that have addressed this precise issue have found that the exclusion requires an action or omission ‘taken against a worker in the employment context in a targeted, personal way,’ ” Alonso wrote, quoting multiple cases. “Additionally, Illinois cases interpreting substantially similar employment-related practices exclusions in other contexts have found that ‘the salient question is whether the (allegations giving rise to the underlying complaint) were made in the context of (the employee’s) employment and related to his employment performance.’ ”
Time clock use, Alonso continued, isn’t a performance issue nor what is targeted at Figueroa or any other specific employee. The policy language includes examples of the type of conduct that might allow the insurer to invoke the exclusion, but none of those examples are in any way similar to fingerprint time clocks. But Continental Western insisted anything that might legally harm an employee is barred from coverage.
“Continental’s position is an extraordinary one to take, considering it would render the bulk of the exclusion superfluous and runs contrary to the rule that exclusions must be read narrowly,” Alonso wrote.
He set a status hearing for July 13.