Insurance Law

Dist. Ct. did not err in granting defendant-insured’s motion for summary judgment in plaintiff-insurance company’s action, seeking declaration that it had no obligation to defend defendant in underlying class actions, alleging that defendant violated Illinois Biometric Information Privacy Act (BIPA) by selling rights to class members’ facial images that had been collected and scanned into database by third party. Plaintiff asserted that provision contained in its business-owner’s insurance policy that excluded claims arising out of statutes that prohibited or limited dissemination of material or information precluded coverage for claims in underlying class actions alleging violations of BIPA, and thus it had no duty to defend same. While Ct. of Appeals agreed that underlying lawsuits fell within broad language of exclusion, it also agreed with Dist. Ct. that language in exclusion was ambiguous, where it also appeared to exclude coverage for claims that other provisions of policy covered. As such. Dist. Ct. could properly construe instant ambiguity in favor of defendant-insured so as to require defendant to defend defendant in underlying class actions. Ct. of Appeals also rejected defendant’s proposal to give narrowed construction of exclusion so as to resolve any ambiguity, where language of exclusion would not support said proposed construction.

Dist. Ct. did not err in granting defendant-insurance company’s motion to dismiss plaintiff-insured’s action seeking declaration that defendant’s insurance policy covered $85 million in losses that plaintiff incurred when paying COVID-19-related costs associated with cleaning and sanitizing its medical facilities during pandemic and adapting said facilities to provide testing and screening for COVID-19. Dist. Ct. could properly find that COVID-19 did not cause physical damage or loss to plaintiff’s facilities so as to have said losses come within general coverage provisions of instant all-risk policy. Moreover, said losses were excluded by policy’s contamination exclusion. Also, Dist. Ct. could properly find that certain losses were covered under separate, additional coverage provision that had maximum $1 million benefit for losses stemming from plaintiff’s communicable disease response.

Dist. Ct. did not err in granting plaintiff-insured’s motion for summary judgment in plaintiff’s action, alleging that defendant-insurance company breached its insurance contract by failing to pay $10 million in proceeds from its directors-and-officers liability insurance policy, under circumstances where: (1) federal government began investigation into plaintiff’s contributions to “patient assistance plan,” where federal government asserted that said contributions violated federal Anti-Kickback Statute and federal False Claims Act; (2) federal government claimed that plaintiff funded said plan to help patients pay for plaintiff’s own drugs for which plaintiff would ultimately obtain payment from Medicare; and (3) plaintiff eventually settled with federal government for $100 million, $50 million of which was labeled “restitution to the United States,“ without federal government ever filing formal charges against plaintiff. While defendant denied coverage due to its belief that plaintiff’s settlement of instant “claim” was not insurable, because Illinois public policy prohibits insurance coverage for settlement payments that are restitutionary in nature, Dist. Ct. could properly find that defendant failed to establish that settlement payment was restitutionary in nature. Moreover, Ct. of Appeals held that: (1) even if $50 million portion of settlement payment was restitutionary in nature, i.e. payment designed to restore victim what had been taken from it or to force perpetrator to disgorge fraudulently obtained profits, remaining $50 million could still be categorized as compensatory and thus insurable; and (2) defendant would still have to show that $10 million plaintiff seeks in lawsuit applied to uninsurable portion of settlement payment.

Dist. Ct. did not err in granting defendant-insurance company’s motion for summary judgment in plaintiff-insured’s action seeking payment from defendant on fire losses covered under policy issued by defendant. Record showed that plaintiff had retained third-party as public adjuster and general contractor for repairs on said fire losses and directed any insurance company to include third-party on all payments on fire loss claim. Defendant thereafter negotiated with third-party on said fire loss claim and delivered two settlement checks to third-party that named plaintiff, its mortgagee and third-party as joint co-payees. Third-party then endorsed names of all co-payees, cashed checks and kept proceeds for itself. While plaintiff argued that defendant still had obligation to pay settlement proceeds to it, Dist. Ct. could properly find that when third-party as agent of plaintiff and co-payee received and cashed defendant’s settlement checks, said actions served to discharge defendant’s performance obligations under insurance policy. Ct. further observed that defendant did not agree to take responsibility for actions of public adjuster hired by plaintiff.

Dist. Ct. did not err in granting defendant-insurance company’s motion for summary judgment in plaintiff-insured’s action, alleging that defendant wrongfully denied plaintiff’s claim for life insurance benefits, where: (1) at time plaintiff’s husband signed application for insurance policy, he was unaware of his stage IV lung cancer; (2) plaintiff’s husband subsequently became aware of said diagnosis, but failed to notify defendant of his cancer diagnosis prior to signing actual policy; and (3) husband died approximately one year after signing policy without ever notifying defendant of cancer diagnosis. Language in policy application required husband to notify defendant of any changes in his health between time of application and issuance of policy, and husband’s failure to inform defendant of his known stage IV cancer diagnosis by time he received policy amounted to material misrepresentation that allowed defendant to rescind policy and return premiums to plaintiff. Ct. rejected plaintiff’s contention that husband had no duty to disclose his cancer diagnosis, when he only learned of said diagnosis after he had signed application for policy.