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Insurance Claims professional presents articles and videos on insurance, insurance Claims and insurance law for insurance Claims adjusters, insurance professionals and insurance lawyers who wish to improve their skills and knowledge. Presented by an internationally recognized expert and author.
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June 27, 2023
Defense Required Because Exclusion is Ambiguous

Even Clear Language in Policy Can be Ambiguous

Barry Zalma
Jun 27, 2023

Read the full article at https://lnkd.in/dkKWyn5n and see the full video at https://lnkd.in/dGKNbQ_Q and at https://lnkd.in/dkp9BSwN and at https://zalma.com/blog plus more than 4550 posts.
AI Collection of Facial Recognition Images Violates Illinois Statute

After Wynndalco Enterprises, LLC was sued in two putative class actions for violating the Illinois Biometric Information Privacy Act (“BIPA”) its business liability insurer, Citizens Insurance Company of America sued seeking a declaration that it has no obligation under the terms of the insurance contract to indemnify Wynndalco for the BIPA violations or to supply Wynndalco with a defense. The district court entered judgment on the pleadings for Wynndalco, finding that the language of the catch-all exclusion is ambiguous on its face and that, construing that ambiguity in favor of the insured, Citizens consequently 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 litigation arose from a massive database of facial-image scans assembled by Clearview AI, an artificial intelligence firm that specializes in facial recognition software.

Clearview AI allegedly extracted in excess of three billion photographs of individuals from online social media; converted those images into biometric facial recognition identifiers using proprietary algorithms; collected the original images and their biometric counterparts into its database; and paired those images with information as to where those 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 see other photographs of that 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 individual.

Both suits allege that Wynndalco’s role in this transaction ran afoul of 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 of 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’s insurance coverage through a policy issued to it by Citizens. Section II of the policy sets forth the liability coverage for the business. Citizens contends that coverage of the class action claims is barred by a catch-all provision in a policy exclusion barring coverage for injuries arising out of certain statutory violations. The catch-all exclusion provided: “Any other laws, statutes, ordinances, or regulations, that address, prohibit or limit the printing, dissemination, disposal, collecting, recording, sending, transmitting, communicating or distribution of material or information.”

Illinois regards the proper interpretation of an insurance policy as a question of law. Policy terms that purport to limit the insurance company’s liability are construed in favor of coverage, but only when the terms are ambiguous or susceptible to more than one reasonable interpretation.

In some instances, the language of a policy exclusion may appear clear in isolation, but when compared with a separate policy provision granting coverage for the same type of action or injury that the exclusion ostensibly reaches, an ambiguity arises, in that the exclusion appears to take away with one hand coverage that the policy purports to give with the other. Because the aim of policy interpretation is to give effect to all provisions of the policy and avoid whenever possible construing one provision in a way that tends to nullify another provision, a court when confronted with such an ambiguity must consider whether the reach of the “swallowing” exclusion can be deemed narrower than its plain terms taken in isolation would otherwise suggest.

There was no dispute that a literal, plain-text reading of the catch-all provision would include BIPA violations.

The text does not seem particularly ambiguous. Quite the opposite, it seems clear as a bell- and the clear message is that the provision sweeps broadly. The text is undoubtedly broad. The Seventh Circuit agreed with Wynndalco that the catch-all provision of the exclusion is ambiguous. A plain-text reading of that provision would swallow a substantial portion of the coverage that the policy otherwise explicitly purports to provide in defining a covered “personal or advertising injury,” and arguably all of the coverage for certain categories of wrongs-copyright infringement, to take one example- that are entirely statutory in nature.

On a plain text reading, the catch-all 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 injur[ies]” that the policy purports to cover. This clash between competing provisions of the policy gives rise to the Seventh Circuit concluding there is an ambiguity in the insurance contract language and that catch-all provision is “intractably ambiguous.”

Applying yet another well-established canon the ambiguity must be construed against Citizens and in favor of the insured. As the catch-all provision says nothing about injuries arising from statutes regulating privacy interests, and “[o]ral or written publication, in any manner, of material that violates a person’s right of privacy” is covered the Seventh Circuit concluded that the injuries alleged complaints at least potentially fall within the coverage of the Citizens policy. The Seventh Circuit concluded that Citizens thus owes its insured, Wynndalco, a duty to defend it against those complaints.

ZALMA OPINION

Exclusions in policies exist to limit the coverages provided by the insuring agreement and cause it to provide less coverage than an unlimited insuring agreement. Since people are entitled to enter into any contract that the insurer is willing to offer and the insured is willing to accept, the court will usually not rewrite the contract. There was no question 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 insuring agreements. In this case the Seventh Circuit rewrote the policy and provided the insured more coverage than was provided by the policy.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

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Barry Zalma, Esq., CFE, is available at http://www.zalma.com and [email protected]

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Write to Mr. Zalma at [email protected]; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; https://creators.newsbreak.com/home/content/post; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library.

Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos.

Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://lnkd.in/gfFKUaTf.

Consider subscribing to my publications at substack at https://lnkd.in/gcZKhG6g

Go to Newsbreak.com https://lnkd.in/g8azKc34
Follow me on LinkedIn: https://lnkd.in/guWk7gfM

Go to Barry Zalma videos at Rumble.com at https://lnkd.in/gV9QJYH; Go to Barry Zalma on YouTube- https://lnkd.in/g2hGv88; https://lnkd.in/gYqJ_JcC, go to the Insurance Claims Library – https://lnkd.in/gWVSBde.

00:11:17
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14 hours ago
Ambiguity in Insurance Contract Resolved by Jury

Jury’s Findings Interpreting Insurance Contract Affirmed
Post 5105

See the full video at https://lnkd.in/gPa6Vpg8 and at https://lnkd.in/ghgiZNBN, and at https://zalma.com/blog plus more than 5100 posts.

Madelaine Chocolate Novelties, Inc. (“Madelaine Chocolate”) appealed the district court’s judgment following a jury verdict in favor of Great Northern Insurance Company (“Great Northern”) concerning storm-surge damage caused by “Superstorm Sandy” to Madelaine Chocolate’s production facilities.

In Madelaine Chocolate Novelties, Inc., d.b.a. The Madelaine Chocolate Company v. Great Northern Insurance Company, No. 23-212, United States Court of Appeals, Second Circuit (June 20, 2025) affirmed the trial court ruling in favor of the insurer.

BACKGROUND

Great Northern refused to pay the full claim amount and paid Madelaine Chocolate only about $4 million. In disclaiming coverage, Great Northern invoked the Policy’s flood-exclusion provision, which excludes, in relevant part, “loss or damage caused by ....

00:07:02
June 23, 2025
The Clear Language Of The Insurance Contract Controls

Failure to Name a Party as an Additional Insured Defeats Claim
Post 5104

Read the full article at https://lnkd.in/gbcTYSNa, see the full video at https://lnkd.in/ggmDyTnT and at https://lnkd.in/gZ-uZPh7, and at https://zalma.com/blog plus more than 5100 posts.

Contract Interpretation is Based on the Clear and Unambiguous Language of the Policy

In Associated Industries Insurance Company, Inc. v. Sentinel Insurance Company, Ltd., No. 23-CV-10400 (MMG), United States District Court, S.D. New York (June 16, 2025) an insurance coverage dispute arising from a personal injury action in New York State Supreme Court.

The underlying action, Eduardo Molina v. Venchi 2, LLC, et al., concerned injuries allegedly resulting from a construction accident at premises owned by Central Area Equities Associates LLC (CAEA) and leased by Venchi 2 LLC with the USDC required to determine who was entitled to a defense from which insurer.
KEY POINTS

Parties Involved:

CAEA is insured by Associated Industries Insurance Company, Inc. ...

00:08:22
June 20, 2025
Four Corners of Suit Allows Refusal to Defend

Exclusion Establishes that There is No Duty to Defend Off Site Injuries

Post 5103

Read the full article at https://lnkd.in/geje73Gh, see the full video at https://lnkd.in/gnQp4X-f and at https://lnkd.in/gPPrB47p, and at https://zalma.com/blog plus more than 5100 posts.

Attack by Vicious Dog Excluded

In Foremost Insurance Company, Grand Rapids, Michigan v. Michael B. Steele and Sarah Brown and Kevin Lee Price, Civil Action No. 3:24-CV-00684, United States District Court, M.D. Pennsylvania (June 16, 2025)

Foremost Insurance Company (“Foremost”) sued Michael B. Steele (“Steele”), Sarah Brown (“Brown”), and Kevin Lee Price (“Price”) (collectively, “Defendants”). Foremost sought declaratory relief in the form of a declaration that

1. it owes no insurance coverage to Steele and has no duty to defend or indemnify Steele in an underlying tort action and
2. defense counsel that Foremost has assigned to Steele in the underlying action may withdraw his appearance.

Presently before the Court are two ...

00:08:29
May 15, 2025
Zalma's Insurance Fraud Letter - May 15, 2025

ZIFL Volume 29, Issue 10
The Source for the Insurance Fraud Professional

See the full video at https://lnkd.in/gK_P4-BK and at https://lnkd.in/g2Q7BHBu, and at https://zalma.com/blog and at https://lnkd.in/gjyMWHff.

Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/ You can read the full issue of the May 15, 2025 issue at http://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-05-15-2025.pdf
This issue contains the following articles about insurance fraud:

Health Care Fraud Trial Results in Murder for Hire of Witness

To Avoid Conviction for Insurance Fraud Defendants Murder Witness

In United States of America v. Louis Age, Jr.; Stanton Guillory; Louis Age, III; Ronald Wilson, Jr., No. 22-30656, United States Court of Appeals, Fifth Circuit (April 25, 2025) the Fifth Circuit dealt with the ...

May 15, 2025
CGL Is Not a Medical Malpractice Policy

Professional Health Care Services Exclusion Effective

Post 5073

See the full video at https://lnkd.in/g-f6Tjm5 and at https://lnkd.in/gx3agRzi, and at https://zalma.com/blog plus more than 5050 posts.

This opinion is the recommendation of a Magistrate Judge to the District Court Judge and involves Travelers Casualty Insurance Company and its duty to defend the New Mexico Bone and Joint Institute (NMBJI) and its physicians in a medical negligence lawsuit brought by Tervon Dorsey.

In Travelers Casualty Insurance Company Of America v. New Mexico Bone And Joint Institute, P.C.; American Foundation Of Lower Extremity Surgery And Research, Inc., a New Mexico Corporation; Riley Rampton, DPM; Loren K. Spencer, DPM; Tervon Dorsey, individually; Kimberly Dorsey, individually; and Kate Ferlic as Guardian Ad Litem for K.D. and J.D., minors, No. 2:24-cv-0027 MV/DLM, United States District Court, D. New Mexico (May 8, 2025) the Magistrate Judge Recommended:

Insurance Coverage Dispute:

Travelers issued a Commercial General Liability ...

April 30, 2025
The Devil’s in The Details

A Heads I Win, Tails You Lose Story
Post 5062

Posted on April 30, 2025 by Barry Zalma

"This is a Fictionalized True Crime Story of Insurance Fraud that explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story is designed to help everyone to Understand How Insurance Fraud in America is Costing Everyone who Buys Insurance Thousands of Dollars Every year and Why Insurance Fraud is Safer and More Profitable for the ­­­Perpetrators than any Other Crime."

Immigrant Criminals Attempt to Profit From Insurance Fraud

People who commit insurance fraud as a profession do so because it is easy. It requires no capital investment. The risk is low and the profits are high. The ease with which large amounts of money can be made from insurance fraud removes whatever moral hesitation might stop the perpetrator from committing the crime.

The temptation to do everything outside the law was the downfall of the brothers Karamazov. The brothers had escaped prison in the old Soviet Union by immigrating to the United...

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