W. Bend Mut. Ins. Co. v. Krishna Schaumburg Tan, Inc.

2021 IL 125978

183 N.E.3d 47

451 Ill.Dec. 1

WEST BEND MUTUAL INSURANCE COMPANY, Appellant,

v.KRISHNA SCHAUMBURG TAN, INC., et al., Appellees.

Docket No. 125978

Supreme Court of Illinois.

Opinion filed May 20, 2021.

Thomas F. Lucas, Kristin D. Tauras, and Kelly E. Purkey, of McKenna Storer, of Chicago, for appellant.

Richard M. Burgland, of Pretzel & Stouffer, Chtrd., of Chicago, for appellee Krishna Schaumburg Tan, Inc.

Ryan D. Andrews, Roger Perlstadt, Benjamin S. Thomassen, and Alexander G. Tievsky, of Edelson PC, of Chicago, for other appellee.

JUSTICE NEVILLE delivered the judgment of the court, with opinion.

¶ 1 Klaudia Sekura filed a class-action lawsuit against Krishna Schaumburg Tan, Inc. (Krishna), a tanning salon and franchisee of L.A. Tan, and alleged that Krishna (1) violated the Biometric Information Privacy Act (Act) ( 740 ILCS 14/1 et seq. (West 2018)) provisions relating to the collection of biometric identifiers and biometric information when it scanned Sekura's and its other customers’¹ fingerprints and (2) violated the Act's provisions relating to the disclosure of biometric identifiers and information² when it disclosed biometric information containing her fingerprints "to an out-of-state third party vendor, SunLync." Krishna tendered Sekura's lawsuit to West Bend Mutual Insurance Company (West Bend), its insurer, and requested a defense. West Bend filed a declaratory judgment action against Krishna and Sekura contending that it did not owe a duty to defend Krishna against Sekura's lawsuit. When West Bend and Krishna filed cross-motions for summary judgment, Sekura joined Krishna's motion for summary judgment but sought alternative relief. The Cook County circuit court entered a judgment for Krishna. West Bend appealed, and the appellate court affirmed the trial court's decision. 2020 IL App (1st) 191834, 445 Ill.Dec. 388, 166 N.E.3d 818. We allowed West Bend's petition for leave to appeal ( Ill. S. Ct. R. 315 (eff. Oct. 1, 2019)) and affirm entry of summary judgment for Krishna.

¶ 2 I. BACKGROUND

¶ 3 A. The Underlying Complaint

¶ 4 Sekura purchased a membership from Krishna that gave her access to L.A. Tan's tanning salons. Sekura's membership required Sekura to provide Krishna with her fingerprints. Sekura filed a three-count class-action lawsuit against Krishna and alleged in count I that Krishna violated the Act as follows:

"Krishna Tan systematically and automatically collected, used, stored, and disclosed their [customers’] biometric identifiers or biometric information without first obtaining the written release required by 740 ILCS 14/15(b)(3).

Specifically, Krishna Tan systematically disclosed Plaintiff's and the Class's biometric identifiers and biometric information to SunLync, an out-of-state *** vendor.

* * *

Krishna Tan does not provide a publicly available retention schedule or guidelines for permanently destroying its customers’ biometric identifiers and biometric information as specified by the [Act]."

¶ 5 In count II, Sekura alleged that Krishna was unjustly enriched because Krishna failed to comply with the Act and that Krishna should not be allowed to retain the money Sekura paid to Krishna. In count III, Sekura alleged that Krishna was negligent when it breached its duty of reasonable care by violating the Act. Sekura's prayer for relief sought "statutory damages of $1,000 for each of Krishna Tan's violations of the Act pursuant to 740 ILCS 14/20(1) (West 2020)."

¶ 6 B. West Bend's Policies

¶ 7 West Bend issued two businessowners’ liability policies to Krishna. The policies cover the period from December 1, 2014, through December 1, 2015, and December 1, 2015, through December 1, 2016. West Bend's insurance policies state, in pertinent part, as follows:

"1. Business Liability

a. We will pay those sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury’, ‘property damage’, ‘personal injury’ or ‘advertising injury’ to which this insurance applies. We will have the right and duty to defend the insured against any ‘suit’ seeking those damages. However, we will have no duty to defend the insured against any ‘suit’ seeking damages for ‘bodily injury’, ‘property damage’, ‘personal injury’, or ‘advertising injury’ to which this insurance does not apply.

* * *

b. This insurance applies:

(1) To ‘bodily injury’ and ‘property damage’ only if:

(a) The ‘bodily injury’ or ‘property damage’ is caused by an ‘occurrence’ that takes place in the ‘coverage territory’; and

(b) The ‘bodily injury’ or ‘property damage’ occurs during the policy period.

(2) To:

(a) ‘Personal injury’ caused by an offense arising out of your business, excluding advertising, publishing, broadcasting or telecasting done by or for you;

(b) ‘Advertising injury’ caused by an offense committed in the course of advertising your goods, products or services[.]"

¶ 8 The policies contain the following pertinent definitions:

"F. Liability And Medical Expenses Definitions

1. ‘Advertising injury’ means injury arising out of one or more of the following offenses:

* * *

b. Oral or written publication of material that violates a person's right of privacy;

* * *

3. ‘Bodily injury’ means bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time.

* * *

13. ‘Personal injury’ means injury, other than ‘bodily injury’, arising out of one or more of the following offenses:

* * *

e. Oral or written publication of material that violates a person's right of privacy."

The policies contain the following pertinent exclusions:

"B. Exclusions

1. Applicable To Business Liability Coverage

This insurance does not apply to:

* * *

p. Personal Or Advertising Injury

‘Personal injury’ or ‘advertising injury’:

* * *

(2) Arising out of oral or written publication of material whose first publication took place before the beginning of the policy period;

(3) Arising out of the willful violation of a penal statute or ordinance committed by or with the consent of the insured."

¶ 9 An endorsement to the policies added the following exclusion:

"This insurance does not apply to:

DISTRIBUTION OF MATERIAL IN VIOLATION OF STATUTES

‘Bodily injury’, ‘property damage’, ‘personal injury’ or ‘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 (2018) )], including any amendment of or addition to such law; or

(2) The CAN-SPAM Act of 2003 [( 15 U.S.C. § 7701 (Supp. III 2004) )], including any amendment of or addition to such law; or

(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."

¶ 10 The 2015 policy also included an endorsement adding coverage for costs from a data compromise of the insured. However, the data compromise endorsement was not considered by the appellate court but was raised in Krishna's brief in this appeal.

¶ 11 West Bend advised Krishna in a letter that it would provide a defense under a reservation of rights because it believed that Sekura's lawsuit against Krishna was not covered by the policies. Therefore, West Bend maintained that it did not have a duty to defend Krishna against Sekura's lawsuit.

¶ 12 C. West Bend's Declaratory Judgment Action

¶ 13 West Bend filed a declaratory judgment action and alleged that Sekura's complaint against Krishna does not come within the policies’ coverage for personal injury or advertising injury. First, the declaratory judgment action alleged that Sekura's complaint does not come within the policies’ coverage for "personal injury" or "advertising injury" because the complaint does not allege a publication of material that violates a person's right of privacy. Second, the declaratory judgment action alleged, in the alternative, that the policies’ violations of statutes exclusion applies and bars West Bend from having to provide coverage to Krishna for Sekura's lawsuit.

¶ 14 D. Krishna's Countercomplaint in the Declaratory Judgment Action

¶ 15 Krishna filed a countercomplaint in the declaratory judgment action and alleged in count I that the Sekura lawsuit falls within or potentially within West Bend's policies’ coverage. In count II, which asserted statutory bad faith and vexatious and unreasonable conduct, Krishna alleged that "West Bend's stated defenses that there is no allegation of a ‘personal injury’ and that the Data Compromise endorsement does not apply has no good faith basis in fact or in law."

¶ 16 E. Cross-Motions for Summary Judgment

¶ 17 1. West Bend's Motion for Summary Judgment

¶ 18 West Bend filed a motion for summary judgment and maintained that coverage for an alleged personal injury or advertising injury was not triggered because "the complaint does not allege a ‘publication’ as that term is defined under Illinois law." In support of its position, West Bend cited Valley Forge Insurance Co. v. Swiderski Electronics, Inc. , 223 Ill. 2d 352, 307 Ill.Dec. 653, 860 N.E.2d 307 (2006). West Bend's motion maintained that in Valley Forge this court held that "publication" means communication to the public at large. West Bend argued that disclosure to a single party cannot be considered a publication as the term is defined in Valley Forge and, because there was no publication of material to more than one party that violated Sekura's right of privacy, the personal injury and advertising injury coverages are inapplicable. In the alternative, West Bend's motion maintained that the policies’ violation of statutes exclusion applies and bars coverage to Krishna for the Sekura lawsuit because Sekura's allegations clearly fall within the violation of statutes exclusion.

¶ 19 2. Krishna's Cross-Motion for Summary Judgment

¶ 20 Krishna's cross-motion for summary judgment maintained that the allegations in Sekura's complaint that Krishna shared her biometric identifiers and biometric information with a...