AI collection of images for facial recognition violates Illinois statute
Watch the full video at https://rumble.com/v2wgqdk-defense-required-because-exclusion-is-ambiguous.html and at https://youtu.be/ZviS2zl1Vas
After Wynndalco Enterprises, LLC was sued in two alleged class actions for violations of the Illinois Biometric Information Privacy Act (“BIPA”), its corporate liability insurer sued Citizens Insurance Company of America seeking a declaration that it has no obligation under the terms of the insurance policy for to indemnify Wynndalco for the BIPA breaches or to provide Wynndalco with a defence. The district court ruled on the pleadings for Wynndalco, finding that the language of the summary exclusion is ambiguous on its face and that Citizens, interpreting that ambiguity in favor of the insured, accordingly had a duty to defend Wynndalco.
IN Citizens Insurance Company of America v. Wynndalco Enterprises, LLC, et al., No. 22-2313, United States Court of Appeals, Seventh Circuit (June 15, 2023), the dispute arose from a huge database of facial image scans compiled by Clearview AI, an artificial intelligence company specializing in facial recognition software.
Clearview AI is said to have extracted over three billion photographs of individuals from online social media; converted these images into biometric facial recognition identifiers using proprietary algorithms; collected the original images and their biometric counterparts in its database; and paired these images with information about where these images were found on the Internet. Clearview AI has also created a facial recognition application or “app” that allows a user to identify an individual by uploading a photograph of that person to the app. The app then allows the user to view other photographs of the same person on the media platforms or websites where they appear, along with the identifying information (including their name, address and other personal information) associated with that person.
Both suits allege that Wynndalco’s role in this transaction violated BIPA. Illinois became the first state in the nation to enact biometric data privacy legislation when it promulgated BIPA. Broadly speaking, BIPA codifies an individual’s right to privacy in and control over his or her biometric identifiers and biometric information.
At the time of the sale of the Clearview AI app to the Chicago Police Department, Wynndalco had business owner insurance coverage through a policy issued to it by Citizens. Section II of the policy states the liability coverage for the business. Citizens argues that class action coverage is barred by an overarching provision in a policy exclusion barring coverage for damages arising out of certain statutory violations. The collective exemption contained: “Any other law, statute, ordinance or regulation that addresses, prohibits or restricts the printing, dissemination, disposal, collection, recording, broadcast, transmission, communication or distribution of any material or information.“
Illinois considers the proper interpretation of an insurance policy a question of law. Insurance terms purporting to limit the insurance company’s liability are interpreted in favor of coverage, but only when the terms are ambiguous or susceptible to more than one reasonable interpretation.
In some cases, the language of an insurance exclusion may appear to be clearly isolated, but when compared to a separate insurance provision that provides coverage for the same type of action or injury that the exclusion ostensibly reaches, an ambiguity arises because the exclusion appears to single-handedly remove coverage that the policy provides himself to give with the other. Since the purpose of policy interpretation is to give effect to all provisions of the policy and to avoid whenever possible construing one provision in a manner which tends to invalidate another provision, a court when confronted with such ambiguity must consider the scope of the “swallowing ” ” exclusion may be considered narrower than its simple terms in isolation would otherwise suggest.
There was no dispute that a literal, plain reading of the consolidated provision would include BIPA violations.
The text does not seem very ambiguous. Quite the contrary, it seems clear as clockwork – and the clear message is that the provision sweeps widely. The text is undoubtedly broad. The Seventh Circuit agreed with Wynndalco that the collective provision of the exemption is ambiguous. A plain reading of that provision would swallow a significant portion of the coverage the policy otherwise expressly purports to provide in defining a covered “personal or advertising injury,” and arguably all coverage for certain categories of wrong—copyright infringement, for to take an example – which are entirely statutory in nature.
On a plain reading, the collective provision has an extremely broad sweep – so broad, in fact, that the exclusion on its face would eliminate coverage for a number of statutory injuries expressly included in the definition of “personal and advertising injury”[ies]” which the policy purports to cover. This conflict between competing provisions of the policy has led the Seventh Circuit to conclude that there is an ambiguity in the language of the policy and that the combined provision is “intractably ambiguous.”
Applying yet another well-established canon, the ambiguity must be interpreted against the citizens and in favor of the insured. Because the consolidated provision is silent on damages arising from statutes governing privacy interests, and “[o]ral or written publication, in any way, of material that violates a person’s right to privacy’ is covered. The Seventh Circuit concluded that the alleged injury claims at least potentially fell within the coverage of the citizen policy. The Seventh Circuit concluded that Citizens therefore owes its insured, Wynndalco, a duty to defend it against these complaints.
Exclusions in insurance exist to limit the coverages provided by the insurance policy and cause it to provide less coverage than an unlimited insurance policy. Because people have the right to enter into any contract that the insurer is willing to offer and the insured is willing to accept, the court will not usually rewrite the contract. There was no doubt that the catch-all exclusion was clear and unambiguous, but the district court and the Seventh Circuit created an ambiguity because the exclusion limited the effect of the insurance contracts. In this case, the Seventh Circuit wrote on the policy and gave the insured more coverage than the policy provided.
(c) 2023 Barry Zalma & ClaimSchool, Inc.
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Barry Zalma, Esq., CFE, can be found at http://www.zalma.com and zalma@zalma.com
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