What Is Biometric Information: One Clause Decides Who Pays

Imagine your company gets sued for millions over how it scanned employees' fingerprints. You did nothing wrong, you followed the law. You call your insurance company, expecting them to defend you. And they point at one sentence in your policy and say, "Sorry. Not covered."

That's the strange world of biometric insurance

That's the strange world of biometric insurance. And it turns on a truth most business owners never see coming, being legal and being covered are two completely different things. If you run a business that scans faces, fingerprints, or voices, this affects you directly. But even if you don't, it teaches something powerful about how insurance really works. A single sentence in the fine print can decide who pays. So how does one clause end up controlling millions of dollars?

Let's start with the law that started all this. It's called BIPA, the Illinois Biometric Information Privacy Act. It governs how companies collect things like face scans and fingerprints. Break the rules, and you can face a class action worth millions.

Now, most businesses carry what's called commercial general liability insurance. It's the standard policy that covers everyday claims. And under a section known as Coverage B, it protects against publishing material that violates someone's privacy. Courts have generally agreed, biometric claims usually fit right there.

Businesses assumed they were safe

So businesses assumed they were safe. That's the trap. Having a policy feels like protection, because insurance sounds like a shield against anything related. But possession of a policy isn't the same as coverage for your specific problem.

Here's where it turns. Insurers started fighting back with something called an exclusion clause, language that carves out what they won't cover. One insurer, Hanover, tried to use a broad catch-all exclusion for any "violation of a statute." Basically, "we don't cover claims where you broke some law."

But the Seventh Circuit, a federal appeals court, refused to let it stand. Why? Because the wording was so broad it would've also cancelled coverage the policy promised elsewhere, for things like slander, libel, even intellectual property.

The court used a rule you should know

The court used a rule you should know. When insurance language is ambiguous, judges read that ambiguity against the insurer, and in favor of you, the policyholder.

There's a great way to picture this. Imagine a car policy that excludes "any accident involving a vehicle." That single phrase would wipe out coverage for cars, trucks, motorcycles, bicycles, everything the policy claimed to protect. A court won't allow language that swallows its own promises.

For a business owner, this means a sloppy exclusion can actually save you. But the reverse is just as true, a precise one can leave you exposed.

Insurers learned fast

And insurers learned fast. They're now rewriting policies with explicit biometric exclusions. Industry experts predict that within a year or so, these carve-outs will be everywhere.

You can see the swing in real time. Since early 1/2022, four out of seven federal rulings in Illinois said insurers had to cover biometric defense costs. But within months, after insurers tightened their language, at least four of those same insurers turned around and denied coverage to a single attorney's clients.

So the aha moment is this. A company can follow every privacy law perfectly and still have no insurance coverage. And a company that broke the law might still get defended, purely because its policy was worded badly. Legality and coverage live in two separate universes.