Insurer Says It Owes No Coverage to Data Firm Sued Over Meta Smart Glasses Recordings

An insurer has gone to federal court in California to argue that it bears no responsibility for defending or paying out claims against Sama, the data annotation company accused of using recordings captured by Meta's smart glasses to help train artificial intelligence systems.

In a complaint filed Monday, the insurer contends that the company's own policy explicitly excludes coverage for the type of privacy violations alleged in a wave of consolidated class action lawsuits.

The insurer, Travelers Excess and Surplus Lines Co., told the court it has no duty to defend or indemnify Samasource Impact Sourcing Inc. (the company that operates as Sama) in connection with 13 class actions that have been consolidated against it.

Travelers had issued Sama an errors and omissions policy and has been footing the bill for the company's defense, but only under a reservation of rights, meaning it preserved the ability to later argue that coverage never applied in the first place.

The underlying litigation traces back to March, when users of Meta's AI-enabled glasses began suing both Sama and Meta in the Northern District of California. According to those lawsuits, the glasses recorded video and audio from wearers' everyday lives and funneled that footage to Sama's data annotation operations in Kenya, where employees reviewed and labeled the material to help train Meta's artificial intelligence systems. Plaintiffs say they had no idea this was happening and never agreed to it.

Central to the consumers' case is the claim that they bought the glasses under a false understanding of how the devices worked. They allege Meta marketed the product as privacy-conscious and fully controlled by the person wearing it, when in reality audio and video were being captured and shipped off to a third-party contractor for human review without their knowledge or consent.

Those allegations form the basis for a broad set of legal claims, including invasion of privacy, negligence, and unjust enrichment under common law, along with alleged violations of the federal Wiretap Act, the Electronic Communications Privacy Act, and a range of state-level statutes.

Travelers said that once it learned of the first three class actions, it moved quickly to flag a potential problem, sending Sama a letter on April 1 stating that coverage was barred under the policy's wrongful collection exclusion.

That provision, as described in the complaint, broadly excludes coverage for losses tied to collecting or processing protected personal information, whether done intentionally or not, without the written notice or consent required under applicable privacy laws.

Despite raising that exclusion early on, Travelers said it nonetheless agreed to defend Sama, under reservation of rights, once ten additional class actions were filed and brought to its attention.

But the insurer is now asking the court to confirm that this defense obligation doesn't reflect any actual duty to cover the claims. Beyond the wrongful collection exclusion, Travelers pointed to a second provision in the policy, known as the specific legislation exclusion, which it says bars coverage for losses stemming from violations of laws governing the unsolicited distribution of audio or video recordings.

Travelers also argued that a separate part of the policy excludes claims rooted in false or misleading advertising or violations of consumer protection statutes. The class actions accuse Meta and Sama of misleading consumers about the privacy features of the glasses, arguing that buyers would never have purchased the devices had they known their recordings were being reviewed by outside contractors.

Those claims invoke consumer protection laws in multiple states, including California's False Advertising Law and Consumer Legal Remedies Act, New York's False Advertising Law and Deceptive Acts and Practices Act, and Illinois' Consumer Fraud and Deceptive Business Practices Act.

In addition to disclaiming future obligations, the insurer is now also seeking any money it has already spent defending Sama or that it might pay toward a settlement or judgment.