A growing number of Illinois businesses (both large and small) are being sued in class actions under BIPA. The Act regulates the collection, storage and use of fingerprints, retina scans, scans of facial geometry, and other biometric information. By way of example, such information may be collected by employers using fingerprints for timekeeping purposes, or by software companies collecting facial scans of users. Given the huge financial liability that comes with violations of the Act (not to mention the cost of defending them), insurance coverage is a key issue in these claims.
Coverage depends on the precise terms of the policy at issue. Generally speaking, employers sued under BIPA may find coverage under EPLI policies. Cyber Liability and Media Liability policies also often provide coverage. Coverage has been harder to obtain under most Commercial General Liability policies.
Finding coverage, however, does not end the analysis. Many policies that cover BIPA claims exclude coverage for liquidated damages, which comprise the vast bulk of the exposure for a defendant. BIPA provides that a prevailing plaintiff may recover liquidated damages of $1,000 per violation. For each intentional or reckless violation of the act, the plaintiff may recover liquidated damages of $5,000. In a class of just a few hundred members, each with multiple violations, damages can easily amount to millions of dollars.
Under most policies, the insurer has the right to select defense counsel. However, if an insurer reserves its right to exclude coverage for liquidated damages, and the insured is liable for those damages, then there is a strong argument that the insured has the right to “independent counsel” who has no allegiance to the insurance company. Under this scenario, the insurance company must pay the reasonable fees of such independent counsel.
Having independent counsel in BIPA lawsuits where liquidated damages are excluded can be key, as such counsel may be able to negotiate settlements that are covered by the insurance policy. Be forewarned, however, that insurance companies do not often grant independent counsel easily, and it can often be a battle for an insured to exercise its right to such counsel.