Seventh Circ. Ct. Denied entry to Clearview Litigation Protection Dispute

The Northern District of Illinois recently declined to suspend an insurance coverage dispute determination based on the ongoing Clearview litigation. This was because, after the court found that an insurance policy was in effect, did not require clarification of facts related to the policyholder’s alleged violations of the Illinois Biometric Information Privacy Act (“BIPA”). Citizen Ins. Co. of Am. v. Wynndalco Enters., LLC, No. 20 C 3873, 2021 US Dist. LEXIS 15300 (ND Ill. January 27, 2021). The case is a reminder that as privacy disputes increase, there will inevitably be disputes about which company (if any) should pay a defendant’s cost in defending such claims. Read on below.

In Citizens Ins. Co. of Am. v. Wynndalco Enters., LLC, No. 20 C 3873, 2021 US Dist. LEXIS 15300 (ND Ill. January 27, 2021), the plaintiff (an insurance company) requested declaratory relief that it is not required to defend or indemnify Defendant Wynndalco in two BIPA class actions. The BIPA litigation alleged that Wynndalco “acted as an Illinois-based agent of Clearview, purchasing Clearview’s technology and then reselling or licensing it to law enforcement, directly or through another intermediary.” I would. at 9. Accordingly, Wynndalco allegedly “violated BIPA by collecting, collecting, receiving, storing, disclosing and / or using biometric identifiers and biometric information in the course of its agency relationship with Clearview without complying with legal requirements”. I would.

Citizens then filed a declaratory action seeking a ruling that they were under no obligation to defend or indemnify Wynndalco and Wynndalco’s CEO and founder in the litigation with Clearview. Wynndalco, in turn, endeavored to hold the matter on pending resolution of the underlying cases.

Wynndalco’s motion to remain was based on the principle that “it is generally inappropriate for a court contemplating a declaratory action to determine definitive facts that may bind the parties to the underlying litigation”. I would. at 6. In order to settle the insurers’ dispute, Wynndalco argued that the court must determine two ultimate questions of fact on which the underlying measures depend: (1) “Whether Wynndalco was a government contractor and was therefore exempted under BIPA; and (2) “whether Wynndalco” owned “biometric information.” I would.

The court disagreed. This is due to the need to determine whether citizens are obliged to defend themselves. “The court just has to ask whether the allegations are [BIPA] Complaints, ‘when proven,. . . would establish an injury covered by the policy ”. I would. at * 9 (emphasis in the original). Accordingly, it was not necessary to stay the litigation pending settlement of the BIPA class actions. The court also found that Wynndalco and Wynndalco executives had admitted this in their briefs “in which they set several precedents for suggesting that the insurer’s duty of defense lasts as long as that accusations the underlying complaint may fall within the scope of coverage. ‘”Id. (Emphasis in the original).

So there you have it. This case is a cautionary reminder to privacy litigation defendants that insurance coverage for legal fees is not guaranteed just by the existence of a policy (and the scope of a policy may be questioned before the merits of the underlying privacy litigation are resolved). . We will stay up to date with the latest news on the various issues connected with the Clearview litigation. CPW will be there to keep you updated and to keep you informed of further developments regarding privacy disputes.

© Copyright 2020 Squire Patton Boggs (US) LLPNational Law Review, Volume XI, Number 36

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