An insurer had no duty to defend or indemnify an information technology company in a class action alleging violations of Illinois' Biometric Information Privacy Act, a state appeals court affirmed, finding that underlying events occurred before the claims-made policy's retroactive date.

An underlying class action brought in Illinois state court alleged that information technology company Wynndalco Enterprises LLC violated the state's Biometric Information Privacy Act by selling access to consumers' biometric information collected by artificial intelligence company Clearview AI Inc. A trial court correctly found that Axis Insurance Co. did not breach its duty to defend or indemnify Wynndalco Enterprises LLC in the underlying class action, a three-judge panel said in an order Wednesday. The panel agreed that the alleged "wrongful acts" and "enterprise security events," which assignees of Wynndalco claimed triggered coverage, occurred before the policy's Feb. 20, 2020, retroactive date, and thus were not covered.

The panel rejected the assignees' contention that the wrongful acts and enterprise security events did not occur until May 2020, when Wynndalco was served with the underlying class action and learned that it potentially violated BIPA.

"In support of this argument, plaintiffs take the 'deem to occur' language found in the policy's claims-reporting section and apply that language to the policy's claims-coverage section," Justice LeRoy K. Martin Jr. said, referring to a provision stating that a wrongful act will be deemed to occur when it becomes known to the insured. "Plaintiffs are essentially asking this court to rewrite the policy. We refuse to do so."

The underlying class action, filed by Melissa Thornley, Deborah Benjamin-Koller and Josue Herrera, alleged that Wynndalco violated BIPA when it sold access to consumers' biometric information that had been collected by artificial intelligence company Clearview AI Inc.

According to the ruling, Clearview AI offered to sell access to its database of facial scans to the Chicago Police Department in September 2019, but the department was not authorized to purchase the product because Clearview AI was not an approved vendor. The department then contacted its purchasing agent, CDW-Government LLC, to act as an intermediary for the purchase of the product through Wynndalco, which was an approved vendor.

Wynndalco purchased the product from Clearview AI in December 2019 and resold it to CDW-Government, which in turn sold it to the police department, according to the ruling.

Axis denied coverage for the underlying action based on the policy's "unlawful use of information" and "violation of statute" exclusions, according to the ruling.

Wynndalco ultimately entered into a settlement with the underlying class members and assigned them its rights under the policy.

The assignees sued Axis in December 2021, alleging the insurer breached its contract and acted in bad faith by denying coverage to Wynndalco and the claims fell, or potentially fell, within the policy's coverage for wrongful acts and enterprise security events.

The trial court subsequently ruled in favor of Axis, finding the wrongful act and enterprise security event occurred when Wynndalco purchased and sold the product in December 2019, before the inception of the policy.

The panel on Wednesday also rejected the assignees' contention that the policy is ambiguous as to whether coverage runs from the date that the underlying conduct occurred or the date that the insured became aware of conduct that might give rise to a claim.

"The plain language of the policy's claims-coverage section provides that coverage exists only if 'such wrongful act first occurred on or after the retroactive date and prior to the end of the policy period,'" Justice Martin said. "Further, this section provides coverage for an 'enterprise security event' claim if it 'first occurred on or after the retroactive date and prior to the end of the policy period.'"

Representatives of the parties did not immediately respond to requests for comment Thursday.

Justices LeRoy K. Martin Jr., Bertina E. Lampkin and Mary K. Rochford sat on the appeals panel.

The class is represented by Daniel M. Feeney, Zachary J. Freeman and Rachel Simon of Miller Shakman Levine & Feldman LLP, Kevin M. Forde and Brian P. O'Meara of Forde & O'Meara LLP and David S. Golub of Silver Golub & Teitell LLP.

Axis is represented by James H. Kallianis and Andrew J. Candela of Skarzynski Marick & Black LLP.

The case is Thornley et al. v. Axis Insurance Co., case number 1-24-1480, in the Appellate Court of Illinois, First District.