Today's Trends in Credit Regulation

Failure to Truncate Account Numbers Not “Publication” Covered by Insurance Policy
By L. Jean Noonan

So, despite all of the warnings you have been given about the federal law that prohibits you from printing more than the last five digits of your customers’ credit or debit card numbers or the expiration date on any receipt you provide to them, something went awry at your company and you violated the law. Then, you are hit with a class action lawsuit seeking $1,000 for each receipt that reveals too much information. That’s enough to ruin your day.

Does your insurance company have a duty to defend you under your general liability policy? Obviously, the answer depends on the language in your policy. But, in one recent case, the business owner’s day got much worse when the court found that the language of the business’s insurance policy did not cover the business’s liability to its customer for failing to truncate the customer’s account number. Here’s what happened…

E.T. Limited, Inc. operated a restaurant in Miami, Florida. The restaurant was sued by a consumer who alleged that ETL violated the Fair and Accurate Credit Transactions Act’s amendments to the Fair Credit Reporting Act, which require merchants to truncate consumers’ account numbers and mask the expiration date on credit and debit card receipts. ETL sought a declaratory judgment that its insurance carrier, Essex Insurance Company, was obligated to defend and indemnify it against FACTA lawsuits. ETL’s insurance policy with Essex provided for coverage of “personal and advertising injury,” defined to include oral or written publication of material that slanders or libels a person or organization or disparages a person’s or organization’s goods, products, or services, or oral or written publication, in any manner, of material that violates a person’s right of privacy.

The trial court held that Essex’s general liability policy imposed no duty to defend ETL. ETL appealed. The U.S. Court of Appeals for the Eleventh Circuit affirmed the trial court’s decision. The appellate court noted that the Florida Supreme Court had recently interpreted the term “publication” in a case seeking a declaratory judgment that an insurance carrier was obligated to defend an action against an insured that sent advertisements by facsimile machines in violation of the Telephone Consumer Protection Act. The Florida high court held that the insurance policy was unambiguous and provided coverage for blast-faxing in violation of the TCPA. It adopted a plain-meaning, dictionary definition of “publication” as “communication (as of news or information) to the public: public announcement.”

Applying this definition to ETL’s insurance policy with Essex, the appellate court concluded that providing a credit card receipt to a consumer is not a publication for which the business was insured. The appellate court found that the credit card receipt was a record of a private transaction between the consumer and ETL, and that ETL neither broadcasted nor disseminated the receipt or the credit card information to the general public.

This case may serve as a wake-up call to understand what your insurance policy does, and does not, cover and, more importantly, to check and double-check your credit and debit card procedures.

Creative Hospitality Ventures, Inc. v. United States Liability Insurance Company, 2011 U.S. App. LEXIS 19990 (11th Cir. (S.D. Fla.) September 30, 2011).

L. Jean Noonan is a partner in the Washington, D.C., office of Hudson Cook, LLP. Jean can be reached at 202-327-9700 or by email at

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