Insurance Coverage Vs Exclusion

Interesting and Classic case of US Court of Appeal Judgment dated 15.6.2023 in the case of Citizen Insurance Company.       

To my mind, it is a judgment on “clash” between the policy coverage “personal and advertising injuries” and the interpretation of exclusion eliminating entire coverage for number of statutory injuries.

I am reminded of the phrase “what the right hand gives, the left hand takes” which has its origin in Martin Luther’s Commentary on the Sermon of the Mount.

All-pervading “all-catch-provision” exclusion in the coverage had come up for interpretation in the following brief facts –

Illinois’ Biometric Information Privacy Act protects privacy rights of an individual including over biometric identifiers and biometric information.

Two complaints were filed against the defendants-insured – Illinosis based information technology services firm for violation of BIPAct.

The allegations were that Clearview AI firm specializing in facial recognition software had extracted three billion photographs of individuals from online social media and converted them into biometric facial recognition, created app for facial recognition with the aid of photograph to identify individua and also to find out appearance in social media.

This app was marketed to the  Chicago Police through a contract with the defendants to purchase app from Clearview AI and re-sell it to the Police Department.

Coming to the policy exclusion to the coverage arising out of certain statutory violations, it was provided that this Insurance does not apply to the distribution of material in violation of statutes, any other laws, regulations, etc.

It was found that in view of the clash between coverage and exclusion that the doctrine of ejusdem generis and nonscitur a sociis (it is known by its associates) even cannot resolve the ambiguity.  Moreover, the duty of the Insurer to defend is broader than the duty to indemnify.

Thus, the judgment of the District Court was confirmed.