By Rosa M. Tumialán and Kileen M. Dietrich
The Illinois Appellate Court for the First District issued an opinion on December 19, 2023, in Nat’l Fire Ins. Co. of Hartford & Cont’l Ins. Co. v. Visual Pak Co., Inc., 2023 IL App (1st) 221160, which finally answered the question of whether an updated catch-all provision distinct from that construed by the Illinois Supreme Court in Krishna applied to exclude general liability coverage for violations of the Illinois Biometric Privacy Act (BIPA). Before Visual Pak, Illinois federal district courts sitting in diversity were required to apply Illinois law as construed in Krishna. This resulted in some district courts finding that the post-Krishna language did not exclude BIPA liability while other district courts construed the updated language in context with the spirit of the Krishna analysis to find that the updated exclusion applied, and coverage was excluded. See e.g., Citizens Ins. Co. of Am. v. Thermoflex Waukegan, LLC, 588 F. Supp. 3d 845, 853 (N.D. Ill. 2022) (relying on Krishna in finding that the exclusionary language is ambiguous and so must be construed in favor of coverage of BIPA claims) and Cont’l W. Ins. Co. v. Cheese Merchs. of Am., LLC, 631 F.Supp.3d 503, 514–15 (N.D. Ill. 2022) (finding that exclusionary language is distinguishable from the exclusionary language at issue in Krishna and barred coverage of BIPA claims). The Seventh Circuit ultimately issued an opinion in Citizens Insurance Company of America v. Wynndalco Enterprises, LLC, 70 F.4th 987 (7th Cir. 2023), holding that its reading of Illinois law compelled a finding that the updated policy language in the Violation of Statutes exclusion did not apply to exclude BIPA liability.
The Illinois Appellate Court expressly rejected the Wynndalco analysis and conclusion in Visual Pak. The Illinois Supreme Court later denied a petition for leave to appeal in that case. As such, Visual Pak represents the current state of the law in Illinois on the construction of the post-Krishna policy language which federal district courts sitting in diversity are required to apply. Visual Pak, 2023 IL App (1st) 221160. However, there remains a debate about the status of Illinois law on the application of exclusions to BIPA violations.
The Seventh Circuit recently heard the oral argument in Citizens Ins. Co. of Am. V. Mullins Food Products, where the applicability of Visual Pak as opposed to Wynndalco was squarely called into question.
The oral argument revealed that the panel disagreed with the state appellate court analysis in Visual Pak, characterizing it as a “sleight of hand.” The questioning suggested that the Seventh Circuit prefers its analysis as it views Wynndalco as more in line with Illinois law. Indeed, the panel suggested that certifying the question to the Illinois Supreme Court (which could settle the dispute of what Illinois holds) was itself problematic.
The debate at the Citizens oral argument has implications beyond the specific BIPA coverage question at issue. Setting aside the fact that the Seventh Circuit’s resistance to the Visual Pak analysis creates a line of federal case law that is arguably in derogation of the current state of Illinois law, the disagreement by a federal court with the decision of a state appellate court potentially undermines the fundamental legal principle embodied in the Erie Doctrine, the purpose of which is to ensure that the outcome of federal litigation based on a state’s law would be the same as if the case had been brought in that state’s court.
The Citizens oral argument was conducted on October 28, 2024. The Seventh Circuit’s forthcoming opinion could determine whether the decision of an intermediate state appellate court can be second-guessed by a federal court making an “Erie guess.”
In the meantime, Citizens is yet another reason why insurers questioning coverage for BIPA violations should initiate coverage litigation in state court where there is no doubt as to the application and viability of Visual Pak.
About the Authors
Rosa M. Tumialán
Rosa is a partner and Co-Chair of Tressler’s Insurance Practice Group, Chair of the Appellate Team and a member of the firm’s national Diversity, Equity and Inclusion Committee. Rosa focuses her practice on insurance coverage and litigation. She is an accomplished defense attorney with more than twenty years of experience. Rosa’s insurer-related services include coverage opinion analysis and representing insurers in complex coverage disputes relating to personal and commercial lines, third party claims, surplus lines as well as claims handling practices and extracontractual liability. She has also litigated environmental coverage disputes throughout the Midwest for various insurers relating to superfund sites. Rosa assists with drafting coverage documents for insurance pools and counsels clients in the administration of same. Her practice also includes serving as national coordinating coverage counsel for insurance clients who rely on her to develop and implement strategies nationwide in response to pattern litigation. Rosa is an accomplished class action defense lawyer and appellate practitioner, having appeared and argued in both state and federal courts nationwide.
Kileen M. Dietrich
Kileen is an associate attorney in Tressler’s Insurance Services Practice Group in the Chicago Office. Kileen focuses her practice on coverage analysis in matters involving a wide range of policies, including professional liability and commercial general liability.
About Tressler LLP
Headquartered in Chicago, with eight offices located in five states, Tressler LLP is a national law firm comprised primarily of attorneys who devote their practice to the representation of the insurance industry in coverage analysis and resolution, litigation, underwriting consultation, product development, claims management and reinsurance.
In addition, Tressler has one of the most experienced and multi-faceted government law practices in Illinois, and has attorneys who represent clients in commercial litigation, defense litigation, corporate transactions, employment law and litigation, intellectual property and condominium and common interest community association law.
