Insurance Law Alert

April 2022

In This Issue
Alaska Court Rules That Computer Fraud Provision Covers Losses
Resulting From Email Impersonation Scheme
Addressing a matter of first impression under Alaska law, a federal court ruled that a Computer
Fraud provision in a crime policy covered losses arising from an email impersonation scheme.
City of Unalaksa v. National Union Fire Ins. Co., 2022 WL 826501 (D. Alaska Mar. 18, 2022).
(Click here for full article)“[Simpson Thacher’s]
expertise ranges fromdirect insurance coverageof virtually all kinds, throughto reinsurance matters and cases
relating to insurance companies’
business practices.”–Chambers New York
2021

Minnesota Court Rules That Replacement Of Credit/Debit Cards
Following Data Breach Constitutes “Loss Of Use Of Tangible Property”
A Minnesota district court vacated its prior decision and held that an insurer was obligated toindemnify Target Corp.’s data breach settlement payment because the cost of replacing cancelledcredit and debit cards constituted a loss of use of tangible property under a general liability
policy. Target Corp. v. ACE American Ins. Co., 2022 WL 848095 (D. Minn. Mar. 22, 2022).
(Click here for full article)

Finding No Allegations Of An “Occurrence,” California Court Rules That
Insurer Need Not Defend Opioid SuitsA California district court granted insurers’ summary judgment motion, finding that
underlying opioid suits did not allege a covered “occurrence,” notwithstanding negligencecauses of action in the underlying complaints. AIU Ins. Co. v. McKesson Corp., 2022
WL 1016575 (N.D. Cal. Apr. 5, 2022). (Click here for full article)

California Appellate Court Rules That Insurers Are Not Obligated To
Indemnify Lead Paint Abatement Fund Payment
A California appellate court ruled that insurers were not obligated to indemnify a payment toa lead paint abatement fund under California Insurance Code section 533, which precludes
indemnification for losses caused by the insured’s willful acts. Certain Underwriters at Lloyd’s
London v. ConAgra Grocery Products Co., 2022 WL 1164981 (Ct. App. Cal. Apr. 19, 2022).
(Click here for full article)

Ohio Supreme Court Rules That Incorporation Of A Defective IngredientInto Integrated Product Constitutes Property Damage Caused By An
Occurrence
The Ohio Supreme Court held that the incorporation of a defective component into an
integrated product constituted property damage under an umbrella policy. Motorists Mutual
Ins. Co. v. Ironics, Inc., 2022 WL 852346 (Ohio Mar. 23, 2022). (Click here for full article)

Simpson Thacher & Bartlett LLP

1

“Excess Judgment” Requirement May Be Based On Consent Judgement
Rather Than Verdict, Says Eleventh Circuit
Applying Florida law, the Eleventh Circuit ruled that a plaintiff may establish the requisite“excess judgment” for a bad faith claim through a consent judgment, and that a trial verdict is
not required. McNamara v. Government Employees Ins. Co., 2022 WL 1013043 (11th Cir. Apr.
5, 2022). (Click here for full article)

First New York Appellate Court Affirms Dismissal Of Restaurants’
COVID-19 Coverage Suit
A New York appellate court affirmed the dismissal of a suit seeking property insurance
coverage for pandemic-related business losses. Consolidated Restaurant Operations, Inc. v.
Westport Ins. Corp., 2022 WL 1040376 (N.Y. App. Div. 1st Dep’t Apr. 7, 2022). (Click here forfull article)

Virginia Supreme Court Denies Review Of Hotels’ COVID-19 Coverage Suit
The Virginia Supreme Court declined to accept an appeal from several hotels seeking property
insurance coverage for COVID-19-related business losses, finding no error in a lower court’s
dismissal of the policyholder’s suit. Crescent Hotels & Resorts LLC v. Zurich American Ins.
Co., 2022 WL 1124493 (Va. Apr. 14, 2022). (Click here for full article)

Seventh Circuit Rules That Viral Presence On Property Is Not Direct
Physical Loss Or Damage
The Seventh Circuit ruled that an Illinois district court properly dismissed COVID-19-related
property coverage claims based on the absence of allegations of direct physical loss or damage.
East Coast Entertainment of Durham, LLC v. Houston Cas. Co., 2022 WL 1086377 (7th Cir.
Apr. 12, 2022). (Click here for full article)

In Two Rulings, Fifth Circuit Affirms Dismissal Of COVID-19-Related
Coverage Suits
The Fifth Circuit issued two decisions affirming Louisiana district court dismissals ofpolicyholders’ claims seeking coverage for pandemic-related losses under property policies.
Q Clothier New Orleans, L.L.C. v. Twin City Fire Ins. Co., 29 F.4th 252 (5th Cir. 2022);
Louisiana Bone & Joint Clinic, L.L.C. v. Transportation Ins. Co., 2022 WL 910345 (5th Cir.
Mar. 29, 2022). (Click here for full article)

Maryland District Court Properly Dismissed Policyholder’s Coverage Suit,
Says Fourth Circuit
The Fourth Circuit affirmed a Maryland district court order dismissing a suit seeking businessinterruption coverage for income losses incurred in the wake of government shutdown orders.
The Cordish Companies, Inc. v. Affiliated FM Ins. Co., 2022 WL 114373 (4th Cir. Apr. 14,2022). (Click here for full article)

Another Illinois Court Rules That Violation Of Statutes Exclusion Does
Not Bar Coverage For BIPA Claims
An Illinois court has ruled that a statutory violations exclusion was ambiguous and does not
bar coverage for claims alleging violations of the Biometric Information Privacy Act.
Citizens Ins. Co. of Am. v. Wynndalco Enterprises, LLC, 2022 WL 952534 (N.D. Ill.
Mar. 30, 2022). (Click here for full article)

2

Cyber Alerts:
Alaska Court Rules That
Computer Fraud Provision Covers
Losses Resulting From Email
Impersonation Scheme
Addressing a matter of first impression
under Alaska law, a federal court ruled thata Computer Fraud provision in a crime
policy covered losses arising from an email
impersonation scheme. City of Unalaksa v.
National Union Fire Ins. Co., 2022
WL 826501 (D. Alaska Mar. 18, 2022).
A fraudster sent an email to an employeeof the City of Unalaska, purporting to be avendor and requesting a change in payment
method. Thereafter, employees of the City
followed the protocol for implementing apayment change and ultimately sent wiretransfer payments totaling nearly $3 million
to the fraudster’s bank account. National
Union paid the $100,000 limit under an
Impersonation Fraud Coverage endorsement,
but denied coverage under the Computer
Fraud provision. The City sued for breach ofcontract and declaratory relief and the court
ruled in the City’s favor.

The court rejected these arguments andruled that a reasonable insured would
expect Computer Fraud coverage underthese circumstances. The court relied on theNinth Circuit’s recent decision in Ernst &Hass Management Co., Inc. v. Hiscox, Inc.,
23 F.4th 1195 (9th Cir. 2022) (discussed
in our February 2022 Alert), which heldthat a Computer Fraud provision covered
email impersonation loss because the loss
“resulted directly” from use of a computer
to fraudulently cause a transfer of property,
notwithstanding an employee’s actions ineffectuating the transfer. The court alsorelied on American Tooling Center, Inc. v.
Travelers Cas. & Sur. Co. of Am., 895 F.3d
455 (6th Cir. 2018) (discussed in our July/
August 2018 Alert), in which the Sixth Circuit
ruled that fraudulently induced wire transfers
were a “direct loss” and that the insured
company’s multi-step authorization process
did not qualify as an intervening action
sufficient to break the causal chain.
The Fifth Circuit reached contraryconclusions in Apache Corp. v. Great
American Ins. Co., 662 Fed. App’x 252 (5thCir. 2016) (discussed in our November 2016
Alert) and Mississippi Silicon Holdings, LLC
v. Axis Ins. Co., 843 Fed. App’x 581 (5th Cir.
2021) (discussed in our February 2021 Alert).
However, the Unalaska court deemed thosedecisions unpersuasive and distinguishable
based on the policy language.

Minnesota Court Rules That
Replacement Of Credit/Debit Cards
Following Data Breach Constitutes“Loss Of Use Of Tangible Property”

The Computer Fraud provision provided
coverage for loss of money or other property“resulting directly from the use of any
computer to fraudulently cause a transfer ofthat property.” National Union argued thatthe “incidental” use of a computer to sendfraudulent emails did not constitute “direct”
use of a computer and that this provision was
intended to cover incidents such as hacking
or malware. Additionally, National Union
contended that the intervening actions of City
employees, as well as the thirty-day period
between the fraudster’s initial email and thefirst payment to his account, severed thecausal chain between any purported computer
fraud and the loss.

Our February 2021 Alert discussed a decisionthat held that an insurer was not obligatedto indemnify Target Corp.’s data breachsettlement payment because the cost of
replacing cancelled credit and debit cards
did not constitute a loss of use of tangible
property under a general liability policy.
Target Corp. v. ACE American Ins. Co., 2021
WL 424468 (D. Minn. Feb. 8, 2021). This
month, the Minnesota district court vacatedits decision and granted Target’s summary
judgment motion. Target Corp. v. ACE
American Ins. Co., 2022 WL 848095(D. Minn. Mar. 22, 2022).
Following a breach of Target’s computer
networks, several banks that had issued thecompromised credit and debit cards cancelled3and reissued those cards to customers. The
banks sued Target for the costs associatedwith those actions. The parties eventually
settled, and Target sought indemnificationfrom ACE.
In its original ruling, the court granted ACE’ssummary judgment motion, finding that
Target failed to demonstrate covered property
damage, defined as the “loss of use of tangible
property that is not physically injured.” Thecourt explained that Minnesota law requires
loss-of-use damages to be “based on” the lossof use of the tangible property, and that here,
there was no nexus between the settlement
payment and the value of the loss of the use of
the payment cards.
Vacating that decision, the court concluded
that the inoperability of payment cards
following a data breach constitutes a loss ofuse under the policy. Addressing this matterof first impression under Minnesota law,the court explained: “Cancellation of thecompromised payment cards rendered thepayment cards inoperable. The payment cards
lost their use. Although the compromised
payment cards still existed . . . they could nolonger serve their function.” The court further
held that Minnesota’s causation requirement
was satisfied because Target’s expense insettling the banks’ claims “was a cost incurred
due to the loss of use of the payment cards.”
Finally, the court held that the policy
requirement of “tangible property that is
not physically injured” was met. The insurer
argued that coverage was unavailable because
Target sought compensation for the stolen
data and the policy expressly excluded
electronic data from the definition of tangible
property. The court rejected this contention,
reasoning that it was the use of the “payment
cards, not the use of electronic data, thatwas lost.”

Opioid Alert:
Finding No Allegations Of An“Occurrence,” California Court
Rules That Insurer Need Not
Defend Opioid SuitsA California district court granted insurers’
summary judgment motion, finding that
underlying opioid suits did not allege acovered “occurrence,” notwithstanding
negligence causes of action in the underlying
complaints. AIU Ins. Co. v. McKesson Corp.,
2022 WL 1016575 (N.D. Cal. Apr. 5, 2022).
McKesson, a distributor and seller ofprescription drugs, was named as a defendantin numerous lawsuits alleging negligence,
statutory violations and common law claims
based on its role in marketing and distributing
opioid products. Its insurers denied coverageand sought a declaration that they had no duty
to defend or indemnify the claims.
The court ruled that the underlying suits
alleged damages “for” or “because of” bodily
injury because they alleged “sickness,
addictions, overdoses, and deaths.” Further,
the court held that when government
plaintiffs seek damages reflecting the costs
incurred to provide various opioid-related
services, such costs are for bodily injury.
The court deemed it irrelevant that the
government entities themselves did not
suffer bodily injury, noting that “nothing
in the policies limits coverage to suits that
seek damages for the plaintiff’s own bodily
injury.” Similarly, the court rejected theinsurers’ contention that the suits sought
only economic damages, explaining thatdamages because of bodily injury may bemeasured in monetary terms, but that does
not transform them into purely economic
losses. In concluding that the suits allegedbodily injury, the court expressly disagreed
with the reasoning and conclusion in ACE
American Ins. Co. v. Rite Aid Corp., 270 A.3d239 (Del. 2022) (holding that government4

entities’ claims for the money it spent on the
opioid epidemic were not damages “becauseof” bodily injury) (discussed in our January2022 Alert).
However, the court ruled that the insurers
had no duty to defend because the underlying
claims failed to allege an “occurrence,” which
is an “accident” or “unexpected, unforeseen, or
undesigned happening” under California law.
Emphasizing that an accident is defined by the
initial act itself rather than its consequences,the court held that virtually all of the conduct
alleged in the complaints was intentional.
The court acknowledged that each complaint
included at least one negligence claim, but
concluded that those claims were based
directly on deliberate and intentional conduct.
The court rejected McKesson’s argument that
because the complaints included “should have
known” language, they alleged accidental
conduct, explaining that such an argument“conflates the issues of whether the injury wasforeseeable and whether the ‘injury-producing
acts of the insured’ were deliberate.”

Coverage Alerts:
California Appellate Court Rules
That Insurers Are Not Obligated To
Indemnify Lead Paint Abatement
Fund Payment
A California appellate court ruled that
insurers were not obligated to indemnify
a payment to a lead paint abatement fundunder California Insurance Code section 533,
which precludes indemnification for losses
caused by the insured’s willful acts. Certain
Underwriters at Lloyd’s London v. ConAgra
Grocery Products Co., 2022 WL 1164981(Ct. App. Cal. Apr. 19, 2022).
Multiple government agencies in California
sued lead paint manufacturers, alleging
representative public nuisance. The complaint
alleged that the defendants created or assisted
in creating a public health crisis by promoting
lead for paint use despite knowledge thatlead was hazardous to human health. That
matter resulted in a final judgment against
the defendants, requiring payments to bemade into a lead abatement fund. Insurers
sought a declaration that they had no duty
to indemnify for several reasons, includingthat section 533 prohibits coverage for theintentional act of promoting lead paint. A
California trial court agreed and granted theinsurers’ summary judgment motion. The
appellate court affirmed.
Section 533, which provides that “[a]n insurer
is not liable for a loss caused by the willful actof the insured; but he is not exonerated by the
negligence of the insured, or of the insured’s
agents or others,” is an implied exclusionary
clause in all insurance policies. The appellate
court concluded that section 533 applied
because the underlying litigation establishedthat Fuller (the corporate predecessor to
ConAgra) intentionally promoted lead paintfor interior use with knowledge of the harmful
nature of such use.
ConAgra argued that section 533 did not
apply because it precludes coverage forlosses due to willful acts of the insured
and ConAgra, the insured, committed nowrongful acts and was liable only as Fuller’s

5corporate successor. The court rejected
this assertion as unsupported by case law.
Alternatively, ConAgra contended that even
if application of section 533 turns on Fuller’s
conduct (rather than ConAgra’s) the statuteis inapplicable because there is an insufficientcausal connection between Fuller’s willful acts
and the abatement fund payment for which
ConAgra sought indemnification. Rejecting
this argument, the court stated: “ConAgra
provides no support for its contention that
section 533 could not be found to apply in thiscase absent proof that specific promotions
by Fuller directly resulted in the need forinspection or abatement in each home forwhich ConAgra was liable for payment.”
Finally, the court ruled that the underlying
findings established as a matter of law that
Fuller acted with the knowledge required for
section 533 to apply. In particular, the court
held that the finding in the underlying casethat Fuller promoted lead paint with actual
knowledge that it would deteriorate and resultin injury was sufficient to satisfy the “willfulact” requirement of section 533.

“property damage” caused by an “accident.”
In particular, the court held that there wasdamage to tangible property other than
Ironics’ own property, emphasizing thatdamage to the glass containers (the final
product) is not the same as damage to Ironics’
tube scale (a component of that product).
Deeming the policy language unambiguousand outcome-determinative, the court
declined to apply the integrated-system rule,as set forth in Wisconsin Pharmacal Co., LLC
v. Nebraska Cultures of California, Inc., 2016
WL 785203 (Wis. Mar. 1, 2016) (discussed in
our March 2016 Alert). There, the Wisconsin
Supreme Court held that the incorporationof a defective ingredient into a nutritional
supplement tablet was not “property damage”
caused by an “occurrence.”

Ohio Supreme Court Rules That
Incorporation Of A Defective
Ingredient Into Integrated ProductConstitutes Property Damage
Caused By An Occurrence
The Ohio Supreme Court held that theincorporation of a defective component into
an integrated product constituted property
damage under an umbrella policy. Motorists
Mutual Ins. Co. v. Ironics, Inc., 2022
WL 852346 (Ohio Mar. 23, 2022).
Ironics, a metal product company, soldtube scale to another company to be usedin the production of glass containers.
After the containers were manufactured,it was discovered that the tube scale wascontaminated and that incorporation of
the contaminated tube scale increased thelikelihood that the glass containers would
break. Because the contaminated component
could not be removed from the containers,
the glass company destroyed nearly two tonsof product and then sued Ironics. Ironics’umbrella insurer sought a declaration it had
no duty to defend or indemnify the claims.
The Ohio Supreme Court ruled that theincorporation of Ironics’ defective productinto the glass containers constituted

Bad Faith Alert:“Excess Judgment” Requirement
May Be Based On Consent
Judgement Rather Than Verdict,
Says Eleventh Circuit
Applying Florida law, the Eleventh Circuit
ruled that a plaintiff may establish therequisite “excess judgment” for a bad faithclaim through a consent judgment, and thata trial verdict is not required. McNamara v.
Government Employees Ins. Co., 2022
WL 1013043 (11th Cir. Apr. 5, 2022).
The dispute arose out of an automobile
accident. The injured party sued the driverand the owner of the car and later served
them with a “demand for judgment” under
Florida statutory law. The settlement demand6

provided for payments by the driver andowner that exceeded the owner’s policy limits
and was conditioned upon (1) consent of theowner and driver to final judgment in theprescribed amounts, and (2) confirmationby the automobile insurer that it would notassert breach of contract against the driver orowner by accepting the proposal. The insurer
agreed, and the court entered final judgments
against the owner and driver. Thereafter, theowner and driver sued the insurer for badfaith, seeking to recover the amounts of the
final judgment that exceeded the policy limit.
A Florida district court granted the insurer’ssummary judgment motion, ruling that for
purposes of establishing causation in a bad
faith action, Florida law requires the plaintiff
to establish an “excess judgment” resulting
from a verdict. The Eleventh Circuit reversed,
holding that a consent judgment arisingfrom a stipulated settlement agreement canconstitute an “excess judgment” for purposesof asserting bad faith.

The appellate court held that the policy was
unambiguous and required some “physical”
change or damage to property, rather thana mere loss of use. The court concluded thatthe complaint failed to allege such damage
to property, despite references to actual
viral particles on insured property, because
no property had to be replaced or repaired.
In addition, the court emphasized that therestaurants were able to provide limited
services during the relevant time frame, thus
further supporting the conclusion that theproperty was not physically damaged. As thecourt noted, decisions applying New York law
have uniformly rejected the argument that
COVID-19 causes such physical damage.

The Eleventh Circuit expressly disavowed
Cawthorn v. Auto-Owners Ins. Co., 791 Fed.
App’x 60 (11th Cir. 2019), an unpublishedopinion holding that only a judgment that
follows a trial and results from a verdict
qualifies as an “excess judgment.”

COVID-19 Alerts:
First New York Appellate Court
Affirms Dismissal Of Restaurants’
COVID-19 Coverage Suit
A New York appellate court affirmed thedismissal of a suit seeking property insurance
coverage for pandemic-related businesslosses. Consolidated Restaurant Operations,
Inc. v. Westport Ins. Corp., 2022 WL
1040376 (N.Y. App. Div. 1st Dep’t
Apr. 7, 2022).
The owner of several restaurants sought
coverage for business losses incurred in thewake of government closure orders. The
insurer denied coverage, arguing that theactual or suspected presence of COVID-19
particles did not constitute physical loss ordamage to property, as required by the policy.
In ensuing litigation, a New York trial court
dismissed the policyholder’s complaint. The
appellate court affirmed.

Virginia Supreme Court Denies
Review Of Hotels’ COVID-19
Coverage Suit
The Virginia Supreme Court declined toaccept an appeal from several hotels seeking
property insurance coverage for COVID-19related business losses. Crescent Hotels &Resorts LLC v. Zurich American Ins. Co.,
2022 WL 1124493 (Va. Apr. 14, 2022). A
Virginia trial court had granted the insurers’
motion to dismiss, finding that “physicalloss or damage” was unambiguous and did
not encompass claims that the virus waspresent at insured property. Crescent Hotels& Resorts, LLC v. Zurich American Ins. Co.,
2021 WL 3679210 (Va. Cir. Ct. Aug. 18, 2021).
The trial court also held that exclusions forcontamination and pollution barred coveragein any event. In a summary order, the Virginia
Supreme Court refused the petition forappeal, finding “no reversible error” in the
judgment below.
7Seventh Circuit Rules That Viral
Presence On Property Is Not Direct
Physical Loss Or Damage
The Seventh Circuit ruled that an Illinois
district court properly dismissed COVID-19related property coverage claims based on
the absence of allegations of direct physicalloss or damage. East Coast Entertainmentof Durham, LLC v. Houston Cas. Co., 2022
WL 1086377 (7th Cir. Apr. 12, 2022). Citing
to its decision in Sandy Point Dental, P.C.
v. Cincinnati Ins. Co., 20 F.4th 327 (7thCir. 2021) (discussed in our December 2021
Alert), the court held that the presence of viralparticles at insured property is insufficient toallege direct physical loss or damage because
the virus does not alter the physical structure
or constitute a “use-deprivation so substantial
as to constitute a physical dispossession.”
Notably, the court also held that there was noconflict between Illinois and North Carolina
law regarding the meaning of “direct physicalloss,” and that under the law of either state,
the policy was unambiguous and did not cover
the policyholder’s business losses.

In Two Rulings, Fifth Circuit
Affirms Dismissal Of COVID-19Related Coverage Suits
Last month, the Fifth Circuit issued two
decisions affirming Louisiana district court
dismissals of policyholders’ claims seeking
coverage for pandemic-related losses
under property policies. In Q Clothier New
Orleans, L.L.C. v. Twin City Fire Ins. Co.,
29 F.4th 252 (5th Cir. 2022), the court heldthat coverage for “direct physical loss of ordamage to property” does not encompass
business income losses related to government
shutdown orders. The court explained thatthe loss of income “is not tangible. Nor is it analteration, injury or deprivation of property.
Q Clothier’s property has been unchanged by
the orders.” In addition, the court concluded
that there was no civil authority coverage
because the executive orders were aimed at
slowing the spread of the virus, and were notissued “as a direct result” of a covered causeof loss to nearby property. The court reasoned
that the lack of causation between any loss
or damage to nearby property and the civil
authority orders was fatal to a claim for civil
authority coverage.

Citing to its decision in Q Clothier, the Fifth
Circuit affirmed the dismissal of COVID-19
claims in Louisiana Bone & Joint Clinic,
L.L.C. v. Transportation Ins. Co., 2022
WL 910345 (5th Cir. Mar. 29, 2022).
There, the court rejected the policyholder’sassertion that the business income provision
was ambiguous and that physical loss of ordamage to property could reasonably beinterpreted to include loss of use.

Maryland District Court Properly
Dismissed Policyholder’s Coverage
Suit, Says Fourth Circuit
The Fourth Circuit affirmed a Maryland
district court order dismissing a suit seeking
business interruption coverage for income
losses incurred in the wake of government
shutdown orders. The Cordish Companies,
Inc. v. Affiliated FM Ins. Co., 2022 WL
114373 (4th Cir. Apr. 14, 2022). The district
court concluded that allegations of infectedindividuals or of viral presence near orat insured property did not constitutedirect physical loss or damage to property,
explaining that “[t]he term ‘physical,’ asused in the Policy, ‘clearly indicates that thedamage must affect the good itself, rather
than the Plaintiff’s use of that good.’” The
Cordish Companies, Inc. v. Affiliated FM
Ins. Co., 2021 WL 5448740 (D. Md. Nov.
22, 2021) (citations omitted). The district
court also ruled that the lack of physicaldamage to property was fatal to the claim
for civil authority coverage. Finally, thecourt ruled that coverage would be barredin any event by a contamination exclusion.
Finding no reversible error in the district
court’s holdings, the Fourth Circuitsummarily affirmed.

8

Privacy Alert:
Another Illinois Court Rules
That Violation Of Statutes
Exclusion Does Not Bar Coverage
For BIPA Claims
Another Illinois court has ruled that a statutory
violations exclusion does not bar coveragefor claims alleging violations of the Biometric
Information Privacy Act (“BIPA”).
Last year, the Illinois Supreme Court ruledthat an insurer must defend a suit alleging
BIPA violations, finding that a violation of
statutes exclusion did not apply. West Bend
Mutual Ins. Co. v. Krishna Schaumburg Tan,
Inc., 2021 WL 2005464 (Ill. May 20, 2021)(discussed in our May 2021 Alert). In thatcase, the exclusion specifically referenced two
statutes, the TCPA and the CAN-SPAM Act of
2003, and also included a “catch-all” provisionthat applied to “any statute, ordinanceor regulation” that prohibits or limits the
distribution of material or information. The
Illinois Supreme Court reasoned the catch-all
provision applied only to statutes that regulate
methods of communication (such as telephone
calls, emails or faxes) and did not extend to
BIPA, which regulates the collection of certain
personal data.
Last month, an Illinois district court addressed
the same issue and reached the sameconclusion in a case involving a policy withslightly different language. In Citizens Ins.

Co. of Am. v. Thermoflex Waukegan, LLC,
2022 WL 602534 (N.D. Ill. Mar. 1, 2022),
the exclusion listed three statutes: the TPCA,
the CAN-SPAM Act of 2003 and the FCRA.
Additionally, the catch-all provision in the
exclusion contained “somewhat broader”
language than that presented in West Bend.
Nonetheless, the court ruled that BIPA
claims did not unambiguously fall within the
exclusion. (See March 2022 Alert).
More recently, another Illinois district court,
faced with the nearly identical policy language
to that at issue in Thermoflex, ruled that theexclusion was ambiguous and did not bar
coverage for alleged BIPA violations. Citizens
Ins. Co. of Am. v. Wynndalco Enterprises,
LLC, 2022 WL 952534 (N.D. Ill. Mar. 30,2022). There, the court acknowledged thatthe “BIPA, like the other enumerated statutes,‘regulates the dissemination, disposal,
collecting, recording, sending, transmitting,communicating or distribution of . . .
information.’” However, it reasoned that toconstrue the exclusion to cover BIPA claims
based on the BIPA’s regulation of information
would make certain coverage provisions
illusory because “most statutes ‘regulate
information’ to some degree.” In so ruling, thecourt expressly disagreed with Massachusetts
Bay Ins. Co. v. Impact Fulfillment Services,
LLC, 2021 WL 4392061 (M.D.N.C. Sept. 24,2021) (discussed in our October 2021 Alert),
in which the court ruled that a nearly identicalexclusion applied to BIPA claims.

9Simpson Thacher has been an international leader in the practice of insurance and reinsurance law for
more than a quarter of a century. Our insurance litigation team practices worldwide.

Mary Beth Forshaw+1-212-455-2846
mforshaw@stblaw.com

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irethy@stblaw.com

This edition of the
Insurance Law Alert
was prepared byBryce L. Friedman / +1-212-455-2235
bfriedman@stblaw.com andMary Beth Forshaw / +1-212-455-2846
mforshaw@stblaw.com
with contributions by Karen Cestarikcestari@stblaw.com.

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Los Angeles
1999 Avenue of the Stars
Los Angeles, CA 90067+1-310-407-7500
Palo Alto
2475 Hanover Street
Palo Alto, CA 94304+1-650-251-5000
Washington, D.C.
900 G Street, NW
Washington, D.C. 20001+1-202-636-5500

LondonCityPoint
One Ropemaker Street
London EC2Y 9HUEngland+44-(0)20-7275-6500

Hong Kong
ICBC Tower
3 Garden Road, Central
Hong Kong+852-2514-7600
Tokyo
Ark Hills Sengokuyama Mori Tower
9-10, Roppongi 1-Chome
Minato-Ku, Tokyo 106-0032
Japan+81-3-5562-6200

SOUTH AMERICA

São Paulo
Av. Presidente Juscelino
Kubitschek, 1455
São Paulo, SP 04543-011
Brazil+55-11-3546-1000

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