Thermoflex Waukegan, LLC v. Mitsui Sumitomo Insurance USA, Inc.

595 F.Supp.3d 677

THERMOFLEX WAUKEGAN, LLC, an Illinois limited liability company, Plaintiffs,

v.MITSUI SUMITOMO INSURANCE USA, INC., Defendant.

No. 21 C 788

United States District Court, N.D. Illinois, Eastern Division.

Signed March 30, 2022

David Benjamin Goodman, Kalli Kling Nies, Carrie Ellen Davenport, Goodman Law Group, Chicago, IL, for Plaintiffs.

Jonathan Todd Viner, Lauren Nicole Keilin, Richard H. Nicolaides, Jr., Shawna N. Bray, Nicolaides Fink Thorpe Michaelides Sullivan LLP, Chicago, IL, for Defendant.

MEMORANDUM OPINION AND ORDER

John Z. Lee, United States District Judge Plaintiff Thermoflex Waukegan, LLC, purchased a number of insurance policies from Defendant Mitsui Sumitomo Insurance USA, Inc. related to its business operations. While those policies were in effect, a former worker sued Thermoflex, alleging that it had violated the Illinois Biometric Information Privacy Act ("BIPA"), 740 Ill. Comp. Stat. 14/1 et seq. , by requiring him to scan his handprint to check in and out of work. Thermoflex, in turn, notified Mitsui of the lawsuit and requested that Mitsui defend Thermoflex and indemnify it for any damages arising from the suit. Mitsui responded that the insurance policies it issued to Thermoflex did not cover BIPA claims, and the instant suit followed.

Now Thermoflex and Mitsui have cross-moved for summary judgment as to whether Mitsui has a duty to defend and indemnify Thermoflex under certain commercial general liability policies, as well as excess and umbrella insurance policies.¹ Because the Court concludes that at least one of the exclusions contained in the commercial general liability policies applies to the underlying claims, Mitsui's motion is granted as to these policies, and Thermoflex's cross-motion is denied as to these policies.

I. Undisputed Facts

A. The Underlying Litigation

Gregory Gates filed a class action lawsuit in Illinois state court against Thermoflex and a temporary employment agency. Def.’s Statement of Facts ("DSOF") ¶ 7, ECF No. 27. According to Gates, Thermoflex required him to scan his handprint each time he clocked in and out of work. Id. ¶ 11. Furthermore, Gates claims that Thermoflex transmitted his handprint data to a third party without his authorization. Id. ¶ 12. Gates also alleges that the company did not provide him with a publicly-available policy identifying its retention schedule or procedures for obtaining his consent and release. Id. ¶ 13. As a result, Gates contends, Thermoflex violated BIPA, the Illinois statute that regulates the collection, disclosure, retention, and destruction of biometric information by private entities. Id. ¶ 14; see 740 Ill. Comp. Stat. 14/15.

B. Thermoflex's Commercial General Liability Policies

Mitsui insures Thermoflex under a series of commercial general liability policies ("CGL Policies"). DSOF ¶ 15. In them, Mitsui agreed to "pay those sums that [Thermoflex] becomes legally obligated to pay as damages because of ‘personal and advertising injury’ to which this insurance applies." Id. ¶ 16. The CGL Policies define "personal and advertising injury" as "injury ... arising out of one or more of" certain enumerated offenses, including the "[o]ral or written publication, in any manner, of material that violates a person's right of privacy." Id. ¶ 17. They also require Mitsui to defend Thermoflex when it is named in a suit seeking damages for such injuries. Id.

The CGL Policies contain three pertinent exclusions. The first, entitled "Access Or Disclosure Of Confidential Or Personal Information," states:

This insurance does not apply to ... "personal and advertising injury" arising out of any access to or disclosure of any person's or organization's confidential or personal information, including patents, trade secrets, processing methods, customer lists, financial information, credit card information, health information or any other type of nonpublic information.

Id. ¶ 18.

The second, entitled "Recording And Distribution Of Material Or Information In Violation Of Law," provides that coverage is excluded for:

"Personal and advertising injury" arising directly or indirectly out of any action or omission that violates or is alleged to violate:

(1) The Telephone Consumer Protection Act (TCPA) [ 47 U.S.C. § 227 et seq. ] including any amendment of or addition to such law;

(2) The CAN-SPAM Act of 2003 [ 15 U.S.C. § 7701 et seq. ], including any amendment of or addition to such law;

(3) The Fair Credit Reporting Act (FCRA) [ 15 U.S.C. § 1681 et seq. ], and any amendment of or addition to such law, including the Fair and Accurate Credit Transaction Act (FACTA); or

(4) Any federal, state or local statute, ordinance or regulation, other than the TCPA, CAN-SPAM Act of 2003 or FCRA and their amendments and additions, that addresses, prohibits, or limits the printing, dissemination, disposal, collecting, recording, sending, transmitting, communicating or distribution of material or information.

Id. ¶ 19.

The third, "Employment-Related Practices," reads that the insurance does not apply to "[p]ersonal and advertising injury to ... [a] person arising out of any":

(a) [r]efusal to employ that person;

(b) [t]ermination of that person's employment; or

(c) [e]mployment-related practices, policies, acts or omissions, such as coercion, demotion, evaluation, reassignment, discipline, defamation, harassment, humiliation, discrimination or malicious prosecution directed at that person ....

Id. ¶ 20.

The issue here is whether any of these exclusions precludes coverage for Gates's lawsuit.

II. Legal Standard

Summary judgment is appropriate where "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). "Evidence offered at summary judgment must be admissible to the same extent as at trial, at least if the opposing party objects, except that testimony can be presented in the form of affidavits or transcripts of sworn testimony rather than in person." Baines v. Walgreen Co. , 863 F.3d 656, 662 (7th Cir. 2017). On cross-motions for summary judgment, the court "view[s] the facts and draw[s] reasonable inferences in favor of ‘the party against whom the motion at issue was made.’ " Woodring v. Jackson Cnty. , 986 F.3d 979, 984 (7th Cir. 2021) (quoting Tripp v. Scholz , 872 F.3d 857, 862 (7th Cir. 2017) ).

When seeking summary judgment, the moving party has the initial burden of demonstrating the absence of a genuine issue of material fact. Celotex Corp. v. Catrett , 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The nonmoving party must then "come forward with specific facts showing that there is a genuine issue for trial." LaRiviere v. Bd. of Trs. of S. Ill. Univ. , 926 F.3d 356, 359 (7th Cir. 2019). To satisfy that burden, the nonmoving party must "do more than simply show that there is some metaphysical doubt as to the material facts," Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986), and instead must "establish some genuine issue for trial such that a reasonable jury could return a verdict in her favor," United States v. King-Vassel , 728 F.3d 707, 711 (7th Cir. 2013) (cleaned up); see also Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ("[S]ummary judgment will not lie ... if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.").

III. Analysis

As a preliminary matter, the parties agree that Illinois law applies. Compare Def.’s Mem. Law Supp. Summ. J. ("Def.’s Mem.") at 7, ECF No. 28, with Pl.’s Mem. Law Opp'n Def.’s Mot. Summ. J. ("Pl.’s Mem."), ECF No. 32. Furthermore, all facts relevant to the cross-motions for summary judgment are undisputed. See generally Pl.’s Statement Facts Resp. DSOF ("Pl.’s Resp. DSOF"), ECF No. 29; Def.’s Statement Facts Resp. Pl.’s Statement Additional Facts ("Def.’s Resp. PSOAF"), ECF No. 37; Pl.’s Statement Resp. Def.’s Statement Additional Facts ("Pl.’s Resp. DSOAF"). Accordingly, the Court turns to the question at hand, namely, whether the CGL Policies Mitsui issued to Thermoflex provide coverage for the defense of the Gates lawsuit and indemnification for any damages arising from it. See Mashallah, Inc. v. W. Bend Mut. Ins. Co. , 20 F.4th 311, 319 (7th Cir. 2021) ("Under Illinois law, the interpretation of an insurance policy, like any other contract, is a question of law.").

To do so, the Court must interpret the language of the CGL Policies. "The goal in interpreting an insurance policy is to ascertain and give effect to the intention of the parties, as expressed in the policy language." Scottsdale Ins. Co. v. Columbia Ins. Grp., Inc. , 972 F.3d 915, 919 (7th Cir. 2020) (cleaned up). Under Illinois law, "the burden is initially on the insured party to show that its losses are covered under the policy's coverage terms." Bradley Hotel Corp. v. Aspen Specialty Ins. Co. , 19 F.4th 1002, 1006 (7th Cir. 2021).

As between the issues of defense versus indemnity, the Court turns first to the former and asks whether Mitsui has a duty to defend Thermoflex in the underlying suit. This is so because "[a]n insurer's duty to defend its insured is much broader than its duty to indemnify." Outboard Marine Corp. v. Liberty Mut. Ins. Co. , 154 Ill.2d 90, 180 Ill.Dec. 691, 607 N.E.2d 1204, 1220 (1992). And, as a corollary, "[b]ecause the duty to defend is broader than the duty to indemnify, if an insurer owes no duty to defend, it owes no duty to indemnify." Metzger v. Country Mut. Ins. Co. , 369 Ill.Dec. 443, 986 N.E.2d 756, 761 (Ill. App. Ct. 2013) (internal quotation marks omitted).

To "determine whether the insurer's duty to defend has arisen, the court must compare the allegations of the underlying complaint to the policy language." Id. "If the court determines that these allegations fall within, or potentially within, the policy's coverage, the insurer has a duty to defend the insured against the...