Whole Enchilada restaurant sought coverage for an underlying class action alleging that Whole Enchilada restaurant violated the Fair and Accurate Credit Transactions Act (“FACTA”). FACTA addresses the problem of identity theft by mandating that only the last five digits of the account number of a credit card or debit card shall be printed. The class action plaintiffs alleged that the restaurant violated FACTA by printing full credit card expiration dates on a receipt. Whole Enchilada sought coverage under two commercial general liability policies sold to the restaurant’s parent corporation, Big Burrito Holding Co. Whole Enchilada settled the class action in March 2008, and commenced a declaratory judgment against its insurer for refusing to defend and indemnify it.
The policies at issue contained advertising and personal injury coverage and a “WEB XTEND” endorsement that deleted and replaced the original policy definitions of “Advertising Injury” and “Personal Injury.” The endorsement defined both terms as “oral, written or electronic publication of material that appropriates a person’s likeness, unreasonably places a person in a false light or gives unreasonable publicity to a person’s private life.” The Judge concluded that handing a printed receipt directly to the customer whose card was used did not constitute “publication.” The Judge also noted that the underlying class action complaint did not allege that the information on the receipt was “in any way made generally known, announced publicly, disseminated to the public or released for distribution.” The court also found that the class action complaint did not allege covered damages as it alleged no actual damages but only potential harm. The court found that under Pennsylvania law, the requested statutory damages are recoverable only for willful violations and thus it would be contrary to Pennsylvania public policy to permit coverage for statutory damages.
Accordingly, the insurer’s motion for summary judgment was granted. The insured’s motion for summary judgment as to the insurer’s duty to defend was denied.
