It seems as of late that decisions regarding the scope of the Illinois Biometric Information Privacy Act (BIPA) and insurance coverage for those claims have been coming as quick as finger scan. Fresh off the heels of Thermoflex and Caremel just before that, this week the Illinois District Court for the Northern District of Illinois in State Auto. Mut. Ins. Co. v. Tony’s Finer Foods Enterps., Inc. held that the employment related practices exclusion in Coverage B of a general liability insurance policy did not preclude coverage for a BIPA claim.
Background. The insured, Tony’s Finer Foods, was a grocery store chain with various locations in the Chicago metropolitan area. Tony’s allegedly takes the fingerprints of each employee it hires, and then requires employees to use their fingerprints to clock in and out of work. See 2022 WL 683688, at *1 (N.D. Ill. Mar. 8, 2022). In December 2018, Figueroa, a former employee, sued Tony’s alleging that the use of employee fingerprints violated BIPA. Tony’s sought coverage under its general liability and employment practices liability policies. Coverage litigation ensued in connection with the general liability policies, and the parties cross-moved for summary judgment.
In the wake of West Bend, the carrier withdrew its argument that the underlying litigation did not involve a “publication” within the meaning of the policy’s “personal and advertising injury” coverage; although, we note that the opinion does not explain exactly why. Id. at *3. (The carrier also withdrew its argument that the Recording and Distribution of Material exclusion applied.) The general liability insurer instead argued that there was no duty to defend because of the Coverage B employment related practices (ERP) exclusion as well as because of late notice, which we do not address here. Id. at *4.
The ERP exclusion prohibits coverage for “personal and advertising injury” to:
- 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;
Id. at *5. Examining both the “architecture” of the exclusion and the words employed under the doctrines of noscitur a sociis and ejusdem generis (to a much lesser extent), the court held that the exclusion did not apply.
Beginning its analysis, the court conceded that, at first blush, the ERP exclusion appeared to apply:
At first glance, one might think that the exclusion applies to a BIPA case about how employees clock-in and clock-out of work. Tony’s had a “practice[ ]” for recording the time worked by its employees. They had to use their fingers to sign in and sign out. That’s a practice, and the exclusion seems to cover practices. So the exclusion seemingly applies.
Id. at *5.
However, despite the reading’s “surface appeal,” the court concluded that, “based on a closer read, the text and structure of the exclusion reveal that it does not extend to claims involving BIPA.” Id. Considering the “architecture” of the exclusion – i.e., that it “comes in three subparts … claims about (1) a refusal to hire; (2) termination; and (3) a grab-bag of other employment-related conduct,” the court concluded that the third subpart was defined by the first two. The court reasoned:
That [third] provision does not come out of nowhere. It is the third part of a trilogy, and the first two provisions covered hiring and firing. That context sheds light on the meaning of the third provision. It suggests that the provision applies to an adverse employment action, not any and all claims about something that happens at work. The structure of the language suggests that it requires a change in employment status or other negative treatment directed at the employee.
Id. at *6.
According to the court, the doctrines of noscitur a sociis and ejusdem generis further underscored this conclusion. Observing that “[y]ou can tell a lot about words, like people, by who they hang out with,” the court concluded that practice of collecting and using fingerprint scans did not fit with the practices and behaviors enumerated in subparagraph (c) of the exclusion. Id. at *7. The court characterized the provision as “a laundry list of targeted actions against an employee,” and concluded that “[e]verything in that list suggests a change in an employee’s standing, or targeted mistreatment of a specific person – that is, conduct “directed at that person.” Id. (emphasis in orginal).
Think about it this way. If someone were to add “fingerprinting” to the list, it would stick out like a sore thumb. It is, in some sense, a practice. But it is a categorically different type of practice than everything else in the list. The other items involve mistreatment that is targeted at a specific employee in a direct, personal way. They involve treating a particular person badly. 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.” See Sesame Street, One of These Things (Is Not Like the Others) (Columbia Records 1970).
Id. at *7.
Acknowledging the intra-district split, the court concluded that structure of the ERP exclusion was such to limit its application to a subset of employment related prartices and not to all employment related practices:
Using a finger to clock-in and clock-out is a practice or a policy, in a colloquial sense. But it isn’t the type of practice or policy envisioned by the full text of the provision. To the extent that there is any ambiguity, the tie goes to the insured.
Id. at *9.
What this case means. For the second time in a week, the Illinois federal court (Northern District of Illinois) has rejected application of the ERP exclusion in the context of underlying fingerprint scan BIPA claims, and in doing so, have rejected Caremel.
But we think the real potential impact of this case is on a broader level. In the course of two months, the Northern District of Illinois has rendered three BIPA coverage decisions: one has applied the ERP exclusion, two have rejected it, and two have rejected the Unauthorized Access or Disclosure of Personal Information exclusion. In addition, Thermoflex rejected the Recording or Distribution of Material exclusion, while the carrier in State Farm Auto withdrew its argument that the exclusion applied. Id. at *3 n.1. Each decision involved underlying fingerprint scans. From a precedential value, as federal trial court decisions, individually each has none. Collectively, however, may be another matter. We believe that the common thread of logic and reasoning explained in them – that the doctrines of noscitur a sociis and ejusdem generis – prevent the application of these exclusions will have a significant persuasive impact on future decisions. Carriers should take heed.