Citizens Insurance Company of America v Wynndalco Enterprises
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Citizens Insurance Company of America v. Wynndalco Enterprises, LLC is an insurance-coverage decision concerning the defense of biometric-privacy claims involving Clearview AI's facial-recognition technology. On June 15, 2023, the Seventh Circuit affirmed judgment requiring Citizens to defend its insured, applying Illinois law to the policy's statutory-violation exclusion.[1]
AI connection and underlying claims
The underlying Thornley and Calderon complaints alleged that Wynndalco participated in supplying access to Clearview AI's database and facial-recognition application. The court described competing allegations about whether Wynndalco acted as a reseller or agent. The claimants asserted violations of the Illinois Biometric Information Privacy Act; the Thornley action also included common-law claims. The appellate opinion treated these as allegations in evaluating the insurance dispute.[1]
Policy and disputed wording
Citizens issued a business owner's policy for October 2, 2019 through October 2, 2020. It included personal-and-advertising-injury coverage encompassing certain publications that violate privacy rights. Citizens did not dispute that the pleaded conduct came within that definition; it relied on the policy's exclusion for distribution of material in violation of statutes.[1]
The exclusion named several federal statutes and then included a broad catch-all addressing other laws governing collection, recording, communication and distribution of information. Citizens sought a declaration of no duty to defend or indemnify. Wynndalco and its officers disputed that reading and sought relief concerning the insurer's refusal to defend.[1]
Decision
The district court entered judgment on the pleadings for the insured. The Seventh Circuit agreed that the exclusion's breadth created an ambiguity because a literal reading would remove coverage otherwise granted by the policy. It rejected the proposed narrowing construction and construed the ambiguity against the insurer. Because the underlying complaints at least potentially fell within the policy's coverage, Citizens owed a defense; that duty also extended to the common-law claims in Thornley arising from the same conduct.[1]
Scope and significance
The decision concerns a specified policy, exclusion and governing state law. The AI connection lies in the facial-recognition product behind the underlying allegations. The ruling supplies an example of insurance coverage litigation involving AI under conventional policy language, with the defense obligation as the decided issue. Compare AI exclusions and insurance policy wording for a separately documented express AI endorsement.[1]
Timeline
- October 2, 2019–October 2, 2020: policy period identified by the court.[1]
- February 14, 2023: appellate argument.[1]
- June 15, 2023: appellate judgment affirmed.[1]