Mary L. Mikva
Mary L. Mikva

An insurer has a duty to defend a business that violated Illinois’ biometric privacy law, an appeals court ruled last week.

The 1st District Appellate Court found a Schaumburg tanning salon’s insurance policy must cover the business after it was successfully sued under the Biometric Information Privacy Act for collecting customers’ fingerprints without permission.

Justice Mary L. Mikva authored an 18-page decision in the case, noting the policy covers personal injuries, which includes injuries arising out of “oral or written publication of material that violates a person’s right of privacy.”

The plaintiff in the underlying lawsuit, Klaudia Sekura, had argued the salon, Krishna Schaumburg Tan, Inc., disclosed her fingerprint information to a third-party vendor, and the panel unanimously found such a disclosure qualified as “publication.”

The justices cited dictionary definitions that described “publication” both as making something known to the general public, and simply disclosing something to one other individual or entity.

“Because a common understanding of ‘publication’ encompasses Krishna’s act of providing Ms. Sekura’s fingerprint data to a third party, there also exists potential that Ms. Sekura’s claim against Krishna is covered by the policies. As such, West Bend has a duty to defend Krishna against the underlying complaint pursuant to the ‘personal injury’ coverage provision,” Mikva wrote in the ruling Friday.

The biometric privacy law requires businesses to get consent and disclose how they’ll use peoples’ biometric markers before collecting them, or be subject to damages of up to $5,000 for each violation.

A 1st District panel in September 2018 ruled Sekura’s plaintiff class did not have to specify how the collection of its data caused harm in order to sue in Sekura v. Krishna Schaumburg Tan, Inc., 2018 IL App (1st) 180175. It was a case of first impression in the 1st District, but it conflicted with a 2nd District ruling from a year earlier out of Lake County.

The Illinois Supreme Court resolved the conflict in January 2019, confirming the Sekura logic in Rosenbach v. Six Flags, 2019 IL 123186.

After Sekura filed the underlying case, Krishna’s insurer, West Bend Mutual Insurance Co., agreed to defend it under a reservation of rights, then sued in Cook County Circuit Court seeking a declaratory judgment that it had no duty to defend or indemnify the salon. Krishna filed a counterclaim seeking a ruling that West Bend had a duty to cover and seeking attorney fees alleging bad-faith denial of coverage.

Cook County Associate Judge Franklin U. Valderrama in May 2018 partially granted and denied each party’s motions for summary judgment. He ruled West Bend’s policy contemplated things such as Sekura’s claims and that an exclusion in the policy related to statutory violations did not apply.

But he also ruled West Bend did not create an unreasonable delay in initially denying coverage, and thus the salon was not entitled to attorney fees and costs.

Mikva was joined by Justices Maureen E. Connors and Sheldon A. Harris in affirming Valderrama’s ruling.

Both the salon and the insurer agreed that whether the latter had a duty to defend the former turned on the meaning of “publication,” which was not specifically defined in the policy.

West Bend cited a 2006 Illinois Supreme Court ruling in Valley Forge Insurance Co. v. Swiderski Electronics, Inc., to argue “publication” meant dissemination “to the public.” In that underlying junk-fax case, an insured party sent unsolicited advertisements to a class of plaintiffs, and the high court held the defendant “published the advertisements in both the general sense of communicating information to the public and in the sense of distributing copies of the advertisements to the public.”

But the 1st District panel here wrote that the Valley Forge court never ruled “publication” was exclusive to those situations.

“Common understandings and dictionary definitions of ‘publication’ clearly include both the broad sharing of information to multiple recipients that the court viewed a ‘publication’ in Valley Forge and a more limited sharing of information with a single third party,” Mikva wrote.

“The Oxford English Dictionary, for example, defines ‘publication’ as both ‘[t]he action of making something publicly known’ and ‘Law. Notification or communication to a third party or to a limited number of people regarded as representative of the public.’ Black’s Law Dictionary defines ‘publication’ as ‘[g]enerally, the act of declaring or announcing to the public’ and, in the defamation context, as ‘communication of defamatory words to someone other than the person defamed’ and says specifically that ‘[a] letter sent to a single individual is sufficient.’”

Mikva added that if West Bend wanted “publication” to be defined in the policy as the broad dissemination of information, it could have done so but didn’t.

West Bend next argued that even if the policy was construed as covering an injury such as a violation of the biometric privacy law, a separate provision excludes coverage for violations of statutes more broadly.

The panel rejected this argument too, noting the full title of that exclusion is “Violation of Statutes That Govern E-Mails, Fax, Phone Calls or Other Method of Sending Material or Information.”

“In short, the violation of statutes exclusion applies to bar coverage to violations of statutes that regulate methods of communication,” Mikva wrote. “The [Biometric Information Privacy] Act says nothing about methods of communication. It instead regulates ‘the collection, use, safeguarding, handling, storage, retention, and destruction of biometric identifiers and information.’”

“As Ms. Sekura’s complaint alleges a violation of the [a]ct, this exclusion does not apply to bar coverage to Krishna,” Mikva wrote.

Although it disagreed with the insurer on the other aspects of the case, the panel found there was a bona fide dispute over coverage and thus the salon was not entitled to attorney fees and costs.

Thomas F. Lucas of McKenna Storer represented West Bend in the case. He could not be reached for comment.

Richard M. Burgland of Pretzel & Stouffer, Chartered. represented Krishna Schaumburg Tan. He declined to comment on the case.

Benjamin S. Thomassen, of Edelson P.C. represented Klaudia Sekura. He could not be reached.

The case is West Bend Mutual Insurance Co. v. Krishna Schaumburg Tan, Inc., 2020 IL App (1st) 191834.