Citizens Ins. Co. of Am. v. Mullins Food Prods.

• Docket Number: 22-cv-1334
• Decision Date: 31 July 2023
• Parties: CITIZENS INSURANCE COMPANY OF AMERICA, Plaintiff, v. MULLINS FOOD PRODUCTS, INC., and RICARDO GALAN, individually and on behalf of all others similarly situated, Defendants.
• Court: U.S. District Court — Northern District of Illinois

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CITIZENS INSURANCE COMPANY OF AMERICA, Plaintiff, v. MULLINS FOOD PRODUCTS, INC., and RICARDO GALAN, individually and on behalf of all others similarly situated, Defendants.

No. 22-cv-1334

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

July 31, 2023

MEMORANDUM OPINION AND ORDER

HON JORGE ALONSO UNITED STATES DISTRICT JUDGE

Plaintiff Citizens Insurance Company of America (“Citizens”) brings a five-count complaint for declaratory judgment against Mullins Food Products, Inc. (“Mullins”), and Ricardo Galan (“Galan”) seeking a declaration that Citizens which issued an insurance policy to Mullins, has no duty to defend or indemnify Mullins in the underlying lawsuit filed by Galan, individually and on behalf of all others similarly situated, under the Illinois Biometric Information Privacy Act, 740 ILCS 14/1, et seq. (“BIPA”). Mullins filed a counterclaim seeking a declaration that Citizens is obligated to defend and indemnify Mullins and breached the insurance policy by failing to do so. The parties have filed cross motions for summary judgment pursuant to Federal Rule of Civil Procedure 56. For the reasons set forth below, the Court denies Citizens' motion except with respect to Mullins' breach of contract counterclaim on the duty to defend, which is dismissed, and denies Mullins' cross-motion.

I Background0F^[1]

A. The Underlying Lawsuit

On February 24, 2018, Defendant Galan filed a putative class action complaint (“Galan Complaint”) against Mullins in the Circuit Court of Cook County, Illinois, Case No. 2021 CH 898 (“Galan Lawsuit”). (Citizens' SOF ¶ 8, ECF No. 45.) The Galan Complaint alleges that Galan was Mullins' employee between August 2016 and July 2019, and that he was required to scan his biometric identifiers, such as fingerprints or handprints, as a method to track his time each time he clocked in and out. (Id. ¶ 9, Ex. D thereto at ¶¶ 5, 15-17.) Mullins allegedly disseminated electronic information derived from Plaintiff's biometric identifiers to third parties, including vendors for timekeeping, data storage, and payroll purposes, even though he was not first informed in writing. (Id. Ex. D at ¶¶ 5, 19-20.) Mullins also allegedly failed to seek and secure Galan's consent and inform Galan of Mullins' retention policy for the biometric data. (Id. Ex. D at ¶¶ 20-21.)

The Galan Complaint asserts one cause of action against Mullins for violation of Illinois' BIPA, which, among other things, requires companies to obtain informed written consent from employees before acquiring their biometric data, 740 ILCS 14/15(b), prohibits private entities from disclosing a person's biometric information without first obtaining consent for that disclosure, 740 ILCS 14/15(d)(1), and mandates that companies in possession of biometric data establish and maintain and comply with a biometric data retention and deletion policy, 740 ILCS 14/15(a). (Citizens' SOF Ex. D, ECF No. 45.) Galan alleges that Mullins violated these requirements, and therefore his and the putative class members' right to privacy, as set forth in BIPA. (Id. Ex. D at ¶¶ 33-39.) Galan and others similarly situated allege that the deprivation of statutory rights conferred by BIPA constitutes actual injuries. (Id. Ex. D at ¶ 7.) The class that Galan seeks to certify is defined as: “All individuals whose biometrics were captured, collected, stored, used, transmitted, or disseminated by or on behalf of [Mullins] within the state of Illinois at any time within the applicable limitations period.” (Id. Ex. D at ¶ 23.)

B. The Policies

Mullins seeks coverage of the Galan Lawsuit under three insurance policies issued to it by Citizens: policy number ZBC A251558 01, effective March 24, 2015 to March 24, 2016 (the “2015 Policy”); policy number ZBC A251558 02, effective March 24, 2016 to March 24, 2017 (the “2016 Policy”); and policy number ZBC A251558 03, effective March 24, 2017 to March 24, 2018 (the “2017 Policy” and together with the 2015 Policy and 2016 Policy, the “Policies”). (Citizens' SOF ¶ 1, ECF No. 45.) The Citizens Policies provide, among other things, a general liability coverage part subject to a $1,000,000 Personal and Advertising Injury limit of liability and a general aggregate limit of $2,000,000. (Mullins SOF ¶ 7, ECF No. 54.) The 2016 and 2017 Policies also contain a Cyber Liability Coverage Part that has a $50,000 maximum aggregate limit of liability.

The Citizens Policies each promise that Citizens will “pay those sums that the insured becomes legally obligated to pay as damages because of ‘personal and advertising injury' to which this insurance applies.” (Citizens' SOF ¶ 2, ECF No. 45.) Further, Citizens has “the right and duty to defend the insured against any ‘suit' seeking those damages.” (Id.)

The term “personal and advertising injury” is defined in pertinent part as “injury, including consequential ‘bodily injury', arising out of one or more of the following offenses: . . . d. Oral or written publication, in any manner, of material that slanders or libels a person or organization or disparages a person's or organization's goods, products or services; e. Oral or written publication, in any manner, of material that violates a person's right of privacy; f. The use of another's advertising idea in your ‘advertisement'; or g. Infringing upon another's copyright, trade dress or slogan in your ‘advertisement'.” (Id. ¶ 3; see also, e.g., Ex. A thereto at ECF p. 175 of 1125.)1F^[2]

The Citizens Policies set forth the following exclusion:

This insurance does not apply to: . . .

p. Recording and Distribution Of Material or Information In Violation Of Law

“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), including any amendment of or addition to such law;

(2) The CAN-SPAM Act of 2003, including any amendment of or addition to such law;

(3) The Fair Credit Reporting Act (FCRA), 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.

(Citizens' SOF ¶ 5, ECF No. 45.)

Next, the 2016 and 2017 Policies contain an endorsement that states the following exclusion:

This insurance does not apply to:

Access Or Disclosure Of Confidential Or Personal Information

“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.

This exclusion applies even if damages are claimed for notification costs, credit expenses, public relations expenses, or any other loss, cost or expense incurred by you or others arising out of any access to or disclosure of any person's or organization's confidential or personal information.

(Id. ¶ 6.)

Finally, under the Employment Practices Liability Exclusion Endorsement, the Policies do not apply to:

“Personal and advertising injury” to:

(1) A person arising out of any:

(a) Refusal to employ that person;

(b) Termination of that person's employment; or

(c) Employment-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. ¶ 4.)

The Policies also contain the following condition:

Duties in the Event of Occurrence, Claim or Suit

* * *

b. If a claim is made or a “suit” is brought against any insured you must:

(1) Immediately record the specifics of the claim or “suit” and the date received; and

(2) Notify us as soon as practicable.

You must see to it that we receive written notice of the claim or “suit” as soon as practicable.

c. You and any other involved insured must:

(1) Immediately send us copies of any demands, notices, summonses or legal documents received in connection with the claim or “suit” ....

(Id. ¶ 7.)

“Suit” is defined in pertinent part as “a civil proceeding in which damages because of . . . ‘personal and advertising injury' to which this insurance applies are alleged.” (See, e.g., ECF No. 54-2, ECF p. 176 of 208.)

C. Notice to Citizens of the Galan Lawsuit

Mullins has been in operation since approximately 1957 and has 503 employees. (Id. ¶ 12.) In January 2018, Mullins was acquired by and became a subsidiary of Newly Weds Foods, Inc. (“Newly Weds”). (Id. ¶ 13.) Newly Weds is a food ingredient manufacturer that was founded in 1932 and has approximately 25 to 30 plants worldwide. (Id. ¶ 14.) Newly Weds has its own in-house legal department of up to four attorneys that handles insurance-related matters for both Newly Weds and Mullins. (Id. ¶ 15.) Between 2009 and the present, Newly Weds' legal department has provided notice to its insurance brokers and/or carriers of approximately 18 lawsuits, claims, and/or demands. (Id. ¶ 16.)

In April 2019, a fire destroyed Newly Weds' corporate headquarters in Chicago, which impacted the availability of business records. (Mullins' Statement of Additional Material Facts ¶ 4, ECF No. 52.) Additionally, beginning in early 2020, the COVID-19 pandemic caused volatility and operational disruption in Newly Weds' business. (Id. ¶ 5.)

There is a dispute as to whether...