‘Violation of Laws Applicable to Employers’ Exclusion Bars Coverage for BIPA Suit

The United States District Court for the Northern District of Illinois, applying Illinois law, has held that an Employment Practices Liability (EPL) policy’s “Violation of Laws Applicable to Employers” exclusion bars coverage for suits alleging violations of Illinois’s Biometric Information Privacy Act (BIPA). Church Mutual Ins. Co. v. Prairie Village Supportive Living, LLC, No. 21-C-3752, 2022 WL 3290686 (N.D. Ill. Aug. 11, 2022).

The insured, an assisted living facility, purchased liability insurance coverage including EPL coverage. The insured’s former employee filed a lawsuit alleging that the facility had unlawfully collected, used, and disseminated biometric identifiers of its employees in violation of BIPA. The facility sought insurance coverage under the policy.

The insurer denied coverage, citing to the EPL coverage part’s “Violation of Laws Applicable to Employers” exclusion, which precluded 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 expressly did not apply to claims arising out of various statutes prohibiting discrimination (such as Title VII of the Civil Rights Act, the Americans with Disabilities Act, and the Equal Pay Act), 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.” In subsequent coverage litigation, the insurer argued that the exclusion barred coverage for the underlying suit because BIPA was one of the statutes encompassed by the exclusion “because it imposes responsibilities on [the insured].” The insured contended that the exclusion did not apply because BIPA is “similar” to the discrimination statutes listed in the exclusion.

The court sided with the insurer. It rejected the facility’s assertion that BIPA “is ‘similar’ to the specifically identified exempted laws because it ‘protects employee rights’ and is thus ‘aligned’ with those laws.” Instead, the court noted that the statutes listed in the exception were anti-discrimination statutes, but “BIPA has nothing to do with discrimination. Rather, BIPA imposes responsibilities on all ‘private entities’—including employers—and ‘regulates the collection, use, storage, and retention of biometric identifiers and information.” The court held that “BIPA is categorically different than the enumerated exempted statutes” and “if someone were to add BIPA to the list of exempted statutes, it would stick out like a sore thumb.” On that reasoning, the court determined that the insurer had no coverage obligation for the underlying suit.

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