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Insurance Coverage-Disclosure of Confidential Information


Insurance Coverage-Disclosure of Confidential Information


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7th Circuit Court of Appeals

Case Name: Thermoflex Waukegan, LLC v. Mitsui Sumitomo Insurance USA, Inc.

Case No.: 23-1521

Officials: Flaum, Easterbrook, and Pryor, Circuit Judges.

Focus: Insurance Coverage-Disclosure of Confidential Information

Thermoflex Waukegan faced a lawsuit for allegedly breaching the Biometric Information Privacy Act (BIPA) by implementing handprint-based timekeeping for its hourly employees without obtaining proper consent or utilizing a third party for data processing. Despite having multiple insurance policies, including three from Mitsui Sumitomo Insurance, the latter refused to provide defense or indemnification, prompting legal action.

The district court ruled that a provision in the Basic policy rendered it inapplicable to BIPA claims. This provision excluded coverage for claims arising from access to or disclosure of confidential or personal information, which the court deemed relevant as BIPA categorizes biometric data as confidential.

Similarly, the Excess and Umbrella policy contained two segments. Coverage E mirrored the exclusions of the Basic policy, with the court concurring that it did not cover BIPA claims. However, Coverage U lacked an exclusion concerning nonpublic information. The district court concluded that none of the three potential exclusions to Coverage U definitively relieved Mitsui of its obligation to defend Thermoflex in the state-court litigation.

The Seventh Circuit aligned with the interpretation of the Basic policy and Coverage E, affirming that the exclusions therein did not encompass BIPA claims. Additionally, it concurred that the exclusions under Coverage U did not apply to BIPA, thus determining that Mitsui was obliged to provide Thermoflex with a defense under the Umbrella policy, subject to exhaustion of limits and deductibles from other applicable policies covering the BIPA claims.


Decided 05/17/24

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