Church Mutual Ins. Co. v. Prairie Village Supportive, No. 21-C-3752 (N.D. Ill. Aug. 11, 2022)

In the underlying litigation, a former employee of an assisted living facility filed suit against the facility, alleging it had unlawfully collected, used, and disseminated biometric identifiers of its employees in violation of the Illinois Biometric Information Privacy Act (“BIPA”). The facility noticed the suit under its employment practices liability (“EPL”) coverage, but the insurer denied the claim, citing an exclusion for “Violations of Laws Applicable to Employers.” 

The “Violations of Laws Applicable to Employers” exclusion barred coverage for claims “based on, attributable to, or arising out of” ERISA violations or “any violation of any insured’s responsibilities or duties required by any other federal, state, or local statutes, rules, or regulations, and any rules or regulations promulgated therefor or amendments thereto.” Notably, the exclusion contained a carve-back for claims arising out of various statutes prohibiting discrimination and “any rules or regulations promulgated under any of [the discrimination statutes] and amendments thereto or any similar provisions of any federal, state, or local law.”

The insurer contended that BIPA was one of the statutes encompassed by the exclusion “because it imposes responsibilities on [the facility],” and as such, coverage for the underlying suit was precluded. The facility, on the other hand, argued that BIPA “is ‘similar’ to the specifically identified exempted laws because it ‘protects employee rights’ and is thus ‘aligned’ with those laws.” The court, however, disagreed, holding that the statutes exempted from the exclusion were all related to discrimination. Reasoning that BIPA is “categorically different” because it only regulates the collection, use, and storage of biometric data, the court found there was no coverage for the underlying suit under the EPL policy.


The Takeaway

The narrow-construction rule is a bedrock principle when it comes to the interpretation of insurance policy exclusions. As demonstrated in the case at hand, courts are loath to assign meaning to policy terms and conditions where no ambiguity exists.