CHICAGO – Citizens Insurance Company of America must defend a privacy invasion suit against a business that sold a facial recognition database to Chicago for police purposes, U.S. Seventh Circuit appellate judges ruled on June 15.
They found ambiguity in a Citizens Insurance policy and resolved it in favor of Wynndalco Enterprises.
Wynndalco bought a database from global scanner Clearview AI for $47,500 and sold it for $48,450 to a city purchasing entity that sold it to the police department for $49,875.
Clearview couldn’t sell its database because Chicago hadn’t registered it as a vendor.
Thus Wynndalco earned $950, a sort of commission at 2%, for passing the database along.
A recent Wynndalco press release described the company as an “MBE/DBE/SBE/BEP technology managed services firm delivering sustainable results across a myriad of industries.”
Wynndalco owner David Andalcio holds a seat on the Regional Transportation Authority board.
He held a seat on the state tollway board by appointment of former governor Rod Blagojevich in 2009 until grand jurors indicted Blagojevich that year.
Andalcio also started Wynndalco Enterprises in 2009.
In 2019, Wynndalco obtained a liability policy from Citizens.
The policy stated Citizens wouldn’t cover any injury arising directly or indirectly out of any act or omission that violated three specific laws.
It listed the Telephone Consumer Protection Act, the “Can-Spam Act,” and the Fair Credit Reporting Act.
It added a “catch all” provision excluding coverage for violations of other laws and regulations that addressed collection or dissemination of material or information.
In 2020, plaintiff Melissa Thornley sued the city purchasing agency, the police, and Wynndalco in Cook County Circuit Court.
Plaintiff Mario Calderon sued Clearview and Wynndalco in U.S. district court.
Calderon claimed Wynndalco acted as Clearview’s agent and supplied its product to customers on Clearview’s behalf.
Both plaintiffs sought to lead class actions.
Thornley amended her complaint to allege that Wynndalco profited from information in the Clearview database.
She alleged unjust enrichment and mental anguish from intrusion on her seclusion.
Wynndalco applied for a defense, and Citizens sued Wynndalco in district court for a declaration that the catch all provision relieved it of a duty to defend.
District Judge John Lee found the provision’s expansive wording would preclude coverage not only for violation of privacy statutes but also statutes on slander, libel, trademark, and copyright.
He found he couldn’t read the provision to reach only injuries from violation of privacy statutes and the provision was intractably ambiguous.
Seventh Circuit Judges Ilana Rovner, Thomas Kirsch, and Candace Jackson-Akiwumi agreed.
“In some instances, the language of a policy exclusion may appear clear in isolation, but when compared with a separate policy provision granting coverage for the same type of action or injury that the exclusion ostensibly reaches, an ambiguity arises, in that the exclusion appears to take away with one hand coverage that the policy purports to give with the other,” Rovner wrote.
“These cases sometimes refer to this as the exclusion appearing to swallow the coverage that the policy purports to grant the insured,” she added.
Rovner called it sleight of hand.