Recording and Distribution of Material or Information Exclusion Applies to IL BIPA Violations

The United States District Court for the Middle District of North Carolina, applying North Carolina law, granted the insurers’ motion for judgment on the pleadings, holding that the insurers had no duty to defend the insured against alleged violations of the Illinois Biometric Information Privacy Act (BIPA) because those allegations fall within the Recording and Distribution of Material or Information Exclusion. Specifically, the district court found that BIPA, which regulates the retention, collection, disclosure, and destruction of biometric information (such as, in this case, digital fingerprint scans), is analogous to the statutes enumerated in the exclusion, including the Telephone Consumer Protection Act (TCPA), the CAN-SPAM Act of 2003, and the Fair Credit Reporting Act (FCRA). Thus, allegations of BIPA violations are likewise excluded from coverage.

In the underlying litigation, employees of the insured Impact Fulfillment Services, LLC (“Impact”) alleged violations of BIPA, claiming that Impact used their fingerprints as part of payroll time-keeping procedures at a facility in Illinois. Critically, Impact never informed their employees of the purpose, length of collection, or use this biometric data.

In discussing whether BIPA fell within the Recording and Distribution of Material or Information Exclusion, the court noted the decisions of other district courts nationwide that brought violations of federal privacy laws into the exclusion on the basis of a provision in the exclusion that concerns “[a]ny federal, state or local statute, ordinance or regulation… that addresses, prohibits, or limits the printing, dissemination, disposal, collecting, recording, sending, transmitting, communicating or distribution of material or information.” The district court stated that “the main purpose of this exclusion is to exclude from coverage [violation of] statutes that protect and govern privacy interests in personal information.”

Because BIPA governs a person’s privacy interest in their own biometric information, the District Court found that it is of the same kind, character, and nature as the enumerated statutes. Thus, under North Carolina law, violations of BIPA are excluded from coverage, and the insurers’ motion for judgment on the pleadings was granted. Mass. Bay Ins. Co. v. Impact Fulfillment Serv., LLC, 2021 WL 4392061 (Sept. 24, 2021).