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Proposed Illinois Data Transparency and Privacy Act Referred to State Senate Judiciary Committee

On February 27, 2020, the Illinois State Senate referred SB2330, which if enacted would create the Data Transparency and Privacy Act (the “Proposed Act”), to its Judiciary Committee. The Proposed Act would apply to “businesses”, including insurers, intermediaries, and other third-party service providers, who collect or disclose the personal information of 50,000 or more persons, Illinois households, or a combination thereof or who derive 50% or more of their business’s annual revenue from the sale of personal information. As currently drafted, SB2330 may apply to insurers and other affiliates who write a limited number of policies in Illinois but meet the statutory thresholds through business written outside of Illinois. While the Proposed Act contains a carve-out for personal information collected, processed, sold, or disclosed under the Gramm-Leach-Bliley Act, SB2330 may still have applicability to many insurers and reinsurers admitted to write business in Illinois and may also be of particular note to surplus lines carriers from both an enterprise and an underwriting perspective.

Under SB2330, Illinois consumers, including policyholders who meet the statutory definitions, would have several broad rights concerning personal information: (1) the right to transparency, (2) the right to know, and (3) the right to opt out, correct, and delete. SB2330, 101st Gen. Assemb., Reg. Sess., §§15, 20, 25 (Ill. 2020). Businesses who meet the statutory definition would be required to establish a procedure for collecting consumers’ requests and also for authenticating the consumer making each request. Id. at §30(a). The Proposed Act would mandate a response to a consumer’s request within 45 days. Id. at §30(e). Each impacted business would be required to post links on its website and mobile applications for the purpose of processing consumer requests. Id. at §30(b).

A violation of the Proposed Act would be statutorily deemed an unlawful practice under the Consumer Fraud and Deceptive Business Practices Act. Id. at §40(b). Whether such a finding is constitutionally permissible is something which may need to be tested if the Proposed Act is enacted depending upon regulatory guidance and interpretation. The Illinois Attorney General would be tasked with enforcement of the Proposed Act in terms of alleged violations of the Illinois Consumer Fraud and Deceptive Business Practices Act. Id. Consumers would also have a right of action in the event of “an unauthorized access and exfiltration, theft, or disclosure as a result of the business’ violation of the duty to implement and maintain reasonable security procedures and practices . . . .” Id. at §40(a).

As of March 4, 2020, the Proposed Act has not been scheduled for hearing and has only received a single reading, in a single chamber of the General Assembly. The Illinois Constitution mandates that each bill shall be read by title on at least three different days in each house. ILL. CONST. art. IV, §8(d). It is unclear whether the Proposed Act will meet a similar fate as previous data privacy legislation proposed in recent Illinois sessions. As the Proposed Act has an effective date of July 1, 2021, as currently drafted, it is unclear whether data privacy is something that might have legs in the regular session or something that could be resurrected in the veto session following this November’s election. Either way, SB2330 and similar proposed legislation in other States are of note particularly for insurers who write in multiple jurisdictions and may face an obligation to comply with data privacy laws, each with their own nuance, across multiple jurisdictions.

In Its October-2018 Term, the Supreme Court of the United States Will Address Whether the Court or a Panel of Arbitrators Decides Applicability of the Federal Arbitration Act Where the Parties Have Delegated Questions of Arbitrability to the Arbitrators

On February 26, 2018, the Supreme Court of the United States granted certiorari in Oliveira v. New Prime, Inc., 857 F.3d 7 (1st Cir. 2017), cert. granted, 2018 WL 1037577 (U.S. Feb. 26, 2018) (No. 17-340), and added the case to its October-2018 Term. The Court will resolve a circuit split which has developed among the First, Eighth, and Ninth Circuits, in addition to division among lower federal and state courts, regarding gateway questions of arbitrability under the Section 1 definitions and exemptions of the FAA. More specifically, the Court will again address efforts by lower courts to avoid the broad mandate under the FAA in favor of the enforcement of arbitration agreements in the context of an arbitration agreement containing an express class waiver provision.

The FAA applies to “[a] written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration . . . .” 9 U.S.C. §2 (emphasis added). At issue in New Prime (and the circuit split before SCOTUS), is the intersection of the FAA’s definition of commerce which provides for various exceptions including one for “any other class of workers engaged in foreign or interstate commerce”, 9 U.S.C. §1, and the Supreme Court’s directive that “[a]n agreement to arbitrate a gateway issue is simply an additional, antecedent agreement the party seeking arbitration asks the federal court to enforce”. Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63, 70 (2010). Couched broadly, the question before the Supreme Court is whether a party who wishes to avoid an agreement to arbitrate questions of arbitrability can do so by presenting the dispute as one of statutory interpretation under the FAA. In other words, how broad is the mandate of Rent-A-Center. Such a question may hold similarities to the age old quandary which came first, the chicken or the egg.

Legal questions concerning the enforcement of arbitration agreements and initial questions of arbitrability under the FAA remain points of heated contention. One of the benefits of arbitration is a streamlined process where discovery (and its attendant costs) can be moderated and controlled before a panel of subject matter experts who bring reinsurance, insurance, or other expertise to the dispute at hand. Those efficiencies are much more difficult to realize if courts engage in lengthy proceedings, including discovery and the weighing of evidence, to determine gateway factual questions about arbitrability where the parties contracted to submit questions of arbitrability, i.e. the arbitrator’s jurisdiction among other issues, to the arbitrators.

The Illinois Duty to Defend: Litigation Insurance against Groundless Suits Even When Extrinsic Facts Known to Both Insurer and Insured Would Otherwise Abrogate Coverage

On January 13, 2015, the Illinois Appellate Court issued its opinion in Illinois Tool Works, Inc. v. Travelers Casualty and Surety Co., 2015 IL App. (1st) 132350 (1st Dist. 2015), wherein the court held the insurer had a duty to defend its insured against numerous vaguely pleaded toxic tort complaints. The central issue in Illinois Tool Works was whether facts extrinsic to the underlying complaint, known to both the insurer and insured, can abrogate the duty to defend. The Illinois Appellate Court held that undisputed extrinsic facts not pleaded in the underlying complaint cannot relieve an insurer of its duty to defend unless and until proven in the underlying action. Continue reading The Illinois Duty to Defend: Litigation Insurance against Groundless Suits Even When Extrinsic Facts Known to Both Insurer and Insured Would Otherwise Abrogate Coverage

Duane Morris Chicago Office Adds Trial Partners Tomas M. Thompson and Mark A. Bradford

Duane Morris LLP is pleased to announce that Tomas M. Thompson and Mark A. Bradford have joined the firm’s Trial Practice Group as partners in the firm’s Chicago office. Thompson and Bradford, who join from DLA Piper, follow the addition in the firm’s Chicago office of partners Mark D. Belongia and Lisa T. Scruggs, associate David B. Shafer and associate Brian L. Dougherty.

Continue reading Duane Morris Chicago Office Adds Trial Partners Tomas M. Thompson and Mark A. Bradford