Insurer Cannot Rely on Employment-Related Exclusion in BIPA Suit

An Illinois federal judge said a policy exclusion for employment-related practices does not protect State Automobile Insurance Co. from defending a grocery chain accused of violating the Illinois Biometric Information Privacy Act (BIPA).

U.S. District Court for the Northern District of Illinois judge Steve C. Seeger delivered a March 8 memorandum opinion and order that State Automobile remains on the hook to defend Tony’s Fresh Market in a BIPA case currently under a stay order in state court.

State Automobile sought motion for summary judgement to deny its duty to defend Tony’s, arguing that the grocery chain’s alleged BIPA violations fall under an exclusion for employment-related practices and that the chain breached the notice condition of the policy by waiting too long to notify the insurer of the lawsuit.

Charlene Figueroa, a former Tony’s employee who worked at the chain from March 2017 to September 2018, contends that Tony’s violated BIPA by requiring employees to use fingerprints to clock in and out of work.

Tony’s received service of process in January 2019 and notified its insurance broker, Assurance Agency, between January and March 2019. Assurance did not provide notice of the lawsuit in state court to State Automobile right away.

Tony’s had purchased a commercial general liability insurance policy from State Automobile with coverage running from March 2013 to March 2016. The alleged BIPA violations fall outside the time of coverage, but that is not at issue in the district court ruling.

In June 2019, Tony’s filed a motion to dismiss the case under BIPA’s Statute of Limitations. Six months later, the motion to dismiss was denied.

The state court stayed the case as it awaited an appellate court decision that would serve to clarify the scope of coverage for BIPA claims. The appellate court’s ruling in West Bend Mutual Insurance Co. v. Krishna Schaumburg Tan, Inc. in March 2020 held that providing fingerprinting data to third parties is a form of publication within the meaning of a general liability policy, requiring that an insurer has a duty to defend the employer who took the fingerprints.

In June 2020, Assurance said it would report the underlying action to any of Tony’s general liability providers at the chain’s request. State Automobile received notice of the underlying action in September 2020, 20 months after Tony’s first learned of the lawsuit.

State Automobile claims that there is no coverage because Tony’s breached the notice of condition, as the policy requires Tony’s to notify the insurer “as soon as possible.”

The state court has employed a “start-stop” approach to the lawsuit, wrote Seeger, who notes that the case has been stayed since February 2021 because a related case is currently before the Illinois Supreme Court. Because the case has been stayed for 20 out of 28 months, Tony’s argues that the insurer didn’t suffer any prejudice from the delay.

“In the end, a jury needs to sort it out and decide whether notice came too late,” Seeger concluded.

The crux of State Automobile’s argument to deny coverage centers on a policy exclusion for employment-related practices and how it applies to BIPA.

The exclusion states that insurance does not apply to: “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;

“The only question is whether the state court case is about an injury arising out of “[e]mployment-related practices,” Seeger wrote.

In answering in the negative, Seeger argues that requiring employees to sign in and sign out using fingerprints is a practice but not one covered by the third subsection. The first two subsections focus on the hiring and firing of employees, so it is logical, Seeger surmises, that the third subsection would also have to do with an employee’s standing with the company.

Seeger wrote, “Adding fingerprinting to the list calls to mind the line from a classic Sesame Street tune: ‘one of these things is not like the others / one of these things just doesn’t belong.’”


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Zubair Q Britania

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