American Family Mutual Insurance Company, S.I. v. Caremel, INC. et al

Filing 71

MEMORANDUM Opinion and Order: For the reasons stated herein Plaintiff's Motion for Summary Judgment (Dkt. No. 62) is granted. Civil case terminated. Signed by the Honorable Harry D. Leinenweber on 1/7/2022: Mailed notice (maf)

Case: 1:20-cv-00637 Document #: 71 Filed: 01/07/22 Page 1 of 11 PageID #:861

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
AMERICAN FAMILY MUTUAL
INSURANCE COMPANY, S.I.,
Plaintiff,

Case No. 20 C 637

v.
CAREMEL, INC., LAWRENCE
LINMAN, JUDITH LINMAN, and
JOSEPH ROSS, individually and
on behalf of others similarly
situated,

Judge Harry D. Leinenweber

Defendants.

MEMORANDUM OPINION AND ORDER
Plaintiff American Family Mutual Insurance Company, S.I.’s
Motion for Summary Judgment (Dkt. No. 62) is granted.
I. BACKGROUND
This is a declaratory judgment action brought by American
Family Mutual Insurance Co. related to a Businessowners Policy of
insurance for businesses owned and operated by Defendants Caramel,
Inc.,

Lawrence

Linman,

and

Judith

Linman

(collectively,

“Caremel”). American seeks a declaration that it has no duty to
defend Caremel in a putative class action brought by Defendant
Joseph Ross in the Circuit Court of Kankakee County, Illinois. See
Ross v. Caremel, Inc., No. 2019-L-10 (21st Dist. 2019).

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Caremel operates McDonald’s restaurants in Kankakee County,
Peotone, and Beecher, Illinois. (Ross Compl. ¶ 1, Pls. Stmt. of
Facts,

Ex.

3,

Dkt.

No.

65-3.)

In

2018,

American

issued

Businessowners Policy of insurance number 12XN622503 to Swedeco,
Inc., for the effective period March 1, 2018 to March 1, 2019.
(Def.’s Resp. to Pl.’s Stmt. of Facts (“DSOF”) ¶ 6, Dkt. No. 69.)
The Court understands Swedeco, Inc. to be an affiliate of Caremel’s
McDonald’s

operations.

In

2019,

Swedeco

renewed

its

American

policy for the period March 1, 2019 to March 1, 2020. (Id. ¶ 7.)
The original policy and the renewal are collectively referred to
as the “Policy.”
Ross was an employee at Caramel’s McDonald’s restaurant in
Bradley, Illinois. (Ross Compl. ¶ 2.) In 2019, Ross filed an action
in Illinois state court alleging Caremel violated the Biometric
Information Privacy Act (“BIPA”,) 40 ILCS 14/1 et seq. (the “Ross
Action”). According to the Complaint in the Ross Action, Caremel
required Ross and the other Caremel employees to use a biometric
time clock system to record their time worked. (Ross Compl. ¶ 3.)
The system required Ross and the other employees to scan their
fingerprints whenever they commenced or stopped working. (Id. ¶
4.) This identifying information was then disclosed to Carmel’s
time keeping vendor, a third party. (Id. ¶ 27.) Caremel did not

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obtain Ross’ consent for the disclosure to its vendor, which is
alleged to be a violation of BIPA. (Id. ¶ 29.)
Under the terms of the Policy, American “will pay those sums
the insured becomes legally obligated to pay as damages because of
‘bodily injury,’ ‘property damage’ or ‘personal and advertising
injury’ to which this insurance applies.’” (DSOF ¶ 10.) Pursuant
to this provision, Caramel sought coverage for its defense of the
Ross

Action.

In

response

American

denied

coverage,

invoking

several of the Policy’s exclusionary provisions, including: (1)
the “Access or Disclosure Exclusion,” which carves out coverage
for “access or disclosure of confidential or personal information
and data related to liability” (Id. ¶ 16); (2) the “ERP Exclusion,”
which relates to employment related practices and bars coverage
for personal and advertising injury arising out of employment
related practices, policies, acts or omissions (Id. ¶ 17); and (3)
the “Violation of Statute Exclusion,” which carves out liability
resulting

from

the

distribution

of

material

in

violation

of

statute. (Id. ¶ 18.)
On January 29, 2020, American filed this declaratory judgment
action. (Dkt. No. 1.) On July 20, 2021, American filed this Motion
for Summary Judgment. (Dkt. No. 62.) The issues are now fully
briefed and the Court decides the Motion.

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II. LEGAL STANDARD
Summary judgment is appropriate if there is “no genuine
dispute of material fact and the movant is entitled to judgment as
a matter of law.” FED. R. CIV. P. 56(a). A fact is “material” when
identified by substantive law as affecting the outcome of the suit.
Bunn v. Khoury Enters., Inc., 753 F.3d 676, 681 (7th Cir. 2014).
An issue is genuine when the evidence presented is such that a
reasonable jury could return a verdict for the nonmoving party.
Id. at 681–82. When reviewing the record on a summary judgment
motion,

the

Court

must

view

the

facts

and

draw

reasonable

inferences in the light most favorable to the nonmoving party.
Scott v. Harris, 550 U.S. 372, 378 (2007). If, however, the factual
record cannot support a rational trier of fact to find for the
non-moving party, summary judgment is appropriate. Bunn, 753 F.3d
at 682.
III. DISCUSSION
American’s

single-count

Complaint

seeks

a

declaratory

judgment that the Policy does not include a duty to defend Caremel
in the Ross Action. Under Illinois law the duty to defend depends
on the allegations of the lawsuit to be defended. Outboard Marine
Corp. v. Liberty Mutual Ins. Co., 607 N.E. 2d 1204, 1212 (Ill.
1992). The underlying complaint and insurance policy language are
construed in favor of the insured. Gen. Agents Ins. Co. of Am. v.
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Midwest Sporting Goods Co., 828 N.E.2d 1092, 1098 (Ill. 2005). The
Ross Complaint alleges that Caremel disclosed and disseminated
Ross’s

and

the

class’s

fingerprints

without

obtaining

their

consent.
For the purposes of this Motion, the conduct alleged in the
Ross

Complaint

violated

the

BIPA.

Illinois’s

BIPA

imposes

restrictions on how private entities collect, retain, and dispose
of biometric identifiers such as fingerprints. Bryant v. Compass
Group USA, Inc., 958 F.3d 617, 619 (7th Cir. 2020). Persons
aggrieved by a violation of the BIPA have a right of action against
the offending party. Id. BIPA’s purpose is to protect individuals
against the threat of irreparable privacy harms, identify theft,
and

other

economic

injuries

resulting

from

use

of

biometric

identifiers by private entities. Id. American relies on three
Policy exclusions to deny coverage for the Ross Action. After
considering each exclusion, the Court concludes that ERP Exclusion
applies to the Ross Action. Consequently, summary judgment is
appropriate in favor of American.
The first exclusion American relies upon is the Access or
Disclosure

Exclusion.

This

provision

excludes

coverage

“for

personal and advertising injury . . . arising out of any access to
or disclosure of any person’s . . . confidential or personal
information, including patents, trade secrets, processing methods,
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customer lists, financial information, credit card information,
health information or any other type of nonpublic information.”
(DSOF ¶ 16.) American argues that the plain meaning of this
exclusion would include a person’s fingerprints as obvious nonpublic information. Moreover, the Illinois Personal Information
Act (“IPIA”) defines “personal information” to include “unique
biometric information . . . such as a fingerprint . . . .” 815
ILCS 530/5.
In response, Caremel invokes the doctrine of ejusdem generis.
Ejusdem generis teaches that “where general words follow specific
words in a statutory enumeration, the general words are construed
to

embrace

only

objects

similar

in

nature

to

those

objects

enumerated by the preceding specific words.” Cir. City Stores,
Inc. v. Adams, 532 U.S. 105, 114–15 (2001) (internal quotation and
citation omitted). Caremel argues that because the Access or
Disclosure Exclusion specifically mentions patents, trade secrets,
processing methods, customer lists, financial information, and
health information the reference to “every other type of nonpublic
information” must exclude fingerprints, which are of a different
sort than the examples.
In support of this argument, Caremel relies on the Illinois
Supreme Court’s opinion in West Bend Mut. Ins. Co. v. Krishna
Schaumburg Tan, Inc., 2021 WL 2005464 (Ill. May 21, 2021). Krishna
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was

a

declaratory

judgement

action

that

also

interpreted

an

exclusion provision in a business liability insurance policy. Id.
at

*

1.

violations

The
of

complaint
the

BIPA.

underlying
Id.

The

the

Krishna

Krishna

action

policy

alleged

provided

for

coverage of “personal injury” and “advertising injury” which were
defined to include “oral or written publication of material that
violates a person’s right of privacy.” Id. at *5. Plaintiff insurer
West Bend relied upon an exclusion in its policy that excused
coverage for “Distribution of Material in Violation of Statutes.”
Id. at *2–*3. This exclusion applied to violations of “(1) The
Telephone Consumer Protection Act []; (2) The CAN-SPAM Act of 2003
[]; (3) Any statute, ordinance or regulation, other than the TCPA
or CAN-SPAM Act of 2003, that prohibits or limits the sending,
transmitting,

communicating

or

distribution

of

material

or

information.” Id.
The Illinois Supreme Court concluded that the exclusion did
not apply to defendant’s suit because the statutes listed “regulate
methods of communication,” while BIPA regulates “the collection,
use, safeguarding, handling, storage, retention, and destruction
of biometric identifiers and information.” Id. at *9. The Illinois
Supreme Court held that the doctrine of ejusdem generis eliminated
BIPA claims from the exclusion relied upon by West Bend. Id.*9–
*10. The Illinois Supreme Court went on to say that to the extent
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that

the

exclusion

was

ambiguous,

the

provision

would

be

interpreted in favor of coverage. Id. at *10.
In assessing the ejusdem generis doctrine in this case, the
Court finds that Caremel has the edge on coverage. Patents, trade
secrets, processing methods, and customer lists are all forms of
intellectual

property

which

cannot

be

interpreted

to

include

fingerprints. Financial information likewise cannot be interpreted
to include fingerprints. The closest provision that could arguably
be

interpreted

to

include

fingerprints

would

be

“health

information.” But to do so would stretch the definition of health
information to include a physical characteristic that has nothing
to do with the state of health of an individual. Moreover, to the
extent that the exclusion is ambiguous, it is to be interpreted in
favor of coverage. Id. For these reasons, the Access or Disclosure
Exclusion does not apply to the Ross Action.
American next argues it can deny coverage for the Ross Action
under

the

ERP

Exclusion.

The

ERP

Exclusion

applies

to

suits

alleging claims “arising out of any . . . employment related
practice, policies, acts omissions, such as coercion, demotion,
reassignment discipline, defamation, harassment, humiliation or
discrimination directed at the person . . ..” (DSOF ¶17.) American
contends that the plain reading of this exclusion applies to the
Ross Action because the requirement that an employee give his
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fingerprints is an employment related practice. Caremel responds
with two separate arguments. First, Caramel again invokes the
ejusdem generis doctrine to argue that the harm caused by a BIPA
violation is unlike the exemplar harms listed in the Policy.
Caremel further argues that American advances too broad a reading
of the ERP Exclusion and that the provision applies to practices
directed at individual employees and the fingerprint requirement
is directed at all employees.
American clearly has the advantage of the plain reading of
this exclusion. Looking first at Caremel’s second argument, while
the company contends that the requirement is not directed at an
individual employee, this is simply not the case. The requirement
that an employee submit his fingerprints is a requirement that
applies to employees individually. Furthermore, BIPA “codified
that individuals possess a right to privacy in and control over
their biometric identifiers and biometric information.” Rosenbach
v. Six Flags Ent. Corp., 129 N.E.3d 1197, 1206 (Ill. 2019.)
Consequently,
experienced

the

alleged

individually.

harm,

if

there

Therefore,

is

any,

Caremel’s

would

be

employees,

including Ross, suffer risk of individual injuries as a result of
Caremel’s failure to adhere to the statutory procedures of the
BIPA. This, according to the Illinois Supreme Court, is an injury
in fact. Id. Ross and the individuals in his putative class action
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have

therefore

been

individually

aggrieved

by

the

employment

practice.
The Court further concludes that a BIPA violation is of the
same nature as the exemplar employment-related practices listed in
the Policy. Each of “coercion, demotion, evaluation, reassignment,
discipline,

defamation,

harassment,

humiliation”

reflect

a

practice that can cause an individual harm to an employee. (DSOF
¶ 17.) As discussed above, the same is true for a BIPA violation.
That the conduct harmed many employees at the same time does not
change this analysis. Accordingly, American may deny coverage for
Caremel’s expenses associated with the Ross Action under the ERP
Exclusion.
The third proffered exclusion is the Violation of Statute
Exclusion. This exclusion is virtually identical to the provision
analyzed in Krishna. Krishna, 2021 WL 2005464 at *2–*3. In Krishna,
the Illinois Supreme Court rejected the insurer’s attempt to invoke
this exclusion for BIPA claims. Id. at *10. American fails to
meaningfully differentiate the Policy from the terms at-issue in
Krishna. Accordingly, the Policy’s Violation of Statute Exclusion
does not act to exclude coverage for the Ross Action.
Having concluded that the ERP Exclusion applies to the Ross
Action, the Court concludes that there are no issues of material
fact remaining in this suit. For this reason, the Court grants
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summary judgment in favor of American and issues a declaratory
judgment that the Policy does not include a duty to defend Caremel
in the Ross Action.
IV. CONCLUSION
For the reasons stated herein Plaintiff’s Motion for Summary
Judgment (Dkt. No. 62) is granted.
IT IS SO ORDERED.

Harry D. Leinenweber, Judge
United States District Court
Dated: 1/7/2022

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