Illinois - Commercial General Liability Coverage - Personal and Advertising Injury Claim
In State Auto. Mut. Ins. Co. v. Tony’s Finer Foods Enters. (March 8, 2022), the Northern District of Illinois departed from previous case law in finding an Employment-Related Practices exclusion did not obviate coverage for an Illinois Biometric Information Privacy Act claim based on a workplace fingerprinting requirement. Yet the insurer’s late notice defense survived.
Tony’s, a family-owned and -operated grocery store chain in Chicago, was sued in 2018 by a former employee who alleged that its practice of requiring employees to use their fingerprints to clock in and out of work violated the Illinois Biometric Information Privacy Act (“BIPA”).
Tony’s received service of process on January 8, 2019. Sometime between January 2019 and March 2019, Tony’s asked its broker to notify its insurers of the claim. The broker notified some insurers, including those that had issued CGL policies for 2018 to 2020, as well as employment practices liability and cyber liability insurers. Yet the broker did not immediately send notice of the claim to State Automobile Mutual Insurance Company (“State Automobile”), Tony’s CGL insurer from 2013 to 2016.
In fact, the broker did not provide such notice until September 8, 2020 -- 20 months after Tony’s had received service of process. State Automobile accepted the personal and advertising injury coverage tender from September 8, 2020 forward under a reservation of rights.
The Parties’ Arguments
State Automobile filed a declaratory judgment regarding its duty to defend Tony’s in the underlying BIPA litigation. It then moved for summary judgment on the basis its policies’ Employment-Related Practices exclusion precluded coverage. State Automobile also argued there is no coverage because Tony’s breached the notice condition. Tony’s opposed on the grounds that the exclusion was inapplicable and the notice condition should not undermine coverage since State Automobile suffered no resultant prejudice.
The District Court’s Decision
The court first set forth its interpretive guidelines, including that if the words used in the policy are unambiguous, then “they are given their plain, ordinary, and popular meaning.” Further, it noted the concept that insurance policies are construed broadly is only applicable when “the policy language is ambiguous.” The court noted the “test of ambiguity is what a reasonable person in the position of the insured would understand [the language] to mean, ...”
The opinion first analyzed the applicability of the Employment-Related Practices exclusion. The exclusion applied to “personal and advertising injury” to a person “arising out of any: … Employment-related practices, policies, acts or omissions, such as coercion, demotion, evaluation, reassignment, discipline, defamation, harassment, humiliation, or discrimination directed at that person.”
The court noted “[a]t first glance, one might think that the exclusion applies to a BIPA case about how employees clock-in and clock-out of work.” But the court interpreted the exclusion further to mean that its application to “employment-related practices” requires “a change in employment status or other negative treatment directed at the employee.” As such, the court found it unable to defeat coverage here.
The court based this conclusion on “the architecture of the language” and the assumption that the meaning of a word can be gleaned by “examining the meaning and context of surrounding words.” Yet its reading of the exclusion’s list as applicable only to targeted negative treatment by an employer against a specific employee does not seem to be the only way to read the exclusion, as evidenced by the Northern District of Illinois’ earlier decision in Am. Fam. Mut. Ins. Co. v. Caremel, Inc. (N.D. Ill. 2022) (finding no coverage for BIPA claim on the basis of Employment-Related Practices exclusion).
Despite its conclusion on the Employment-Related Practices exclusion, the court found enough evidence was present “to create a genuine issue of material fact about the timeliness of [Tony’s’] notice, so the decision must go to a jury.” On the one hand, the court noted the notice delay was substantial and Tony’s was relatively sophisticated regarding insurance issues. However, on the other hand, the court recognized the underlying litigation had been stayed for much of that time, “so maybe ‘no harm, no foul’ applies.”
Conclusion
The opinion’s handling of the Employment-Related Practices exclusion revolved around the court’s assumption that “[y]ou can tell a lot about words, like people, by who they hang out with.” This reading of the exclusion with respect to BIPA claims may not be the last word, however, as other Northern District of Illinois opinions have reached opposite conclusions. See Am. Fam. Mut. Ins. Co. v. Caremel, Inc. (N.D. Ill. 2022). Litigants in the coverage arena will likely benefit by staying tuned to such developments.
