MEMORANDUM OPINION
This matter is before the Court on cross motions for summary judgment filed by the plaintiff and the defendant. Based on the foregoing, the defendant’s motion [24] is GRANTED and the plaintiffs motion [8] is DENIED.
PROCEDURAL HISTORY
On November 9, 2007, the plaintiff, Whole Enchilada (“Whole Enchilada”) filed a complaint in declaratory judgment against the defendant, Travelers Property Casualty Co. of America (“Travelers”), and for breach of contract based on Travelers’ alleged duty to defend and indemnify Whole Enchilada in a class action suit brought against it for alleged violations of the Fair and Accurate Credit Transactions Act (“FACTA”). The Complaint seeks a declaration from this Court that Travelers has a duty to defend and indemnify under one or both of two insurance policies issued by Travelers to Whole Enchilada and damages for breach of contract. (Docket No. 1).
Whole Enchilada filed a Motion for Partial Summary Judgment and Memorandum of Law in Support as to Travelers’ duty to defend on February 27, 2008. (Docket No. 8). On March 28, 2008, Travelers filed a Motion for Summary Judgment as to Travelers’ duty to defend and indemnify the underlying litigation.
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Whole Enchilada filed a Reply Brief in Support of its Motion for Summary Judgment and in Opposition to Travelers’ Cross Motion for Summary Judgment on April 28, 2008. (Docket No 32). Travelers likewise filed a Reply Brief in support of its Motion for Summary Judgment on May 13, 2008. (Docket No. 36). The Court notes that both parties chose to file motions for summary judgment prior to completing discovery. As the parties have now fully briefed
FACTUAL BACKGROUND
At issue in this case is the defense and indemnification of the “Reed litigation.” On March 19, 2007, Thomas A. Reed Jr. (“Reed”), on behalf of himself and all others similarly situated, filed a class action complaint against Whole Enchilada for alleged violations of FACTA at Reed, et al v. Whole Enchilada, Inc., Civil Action No. 07-cv-357. (Docket No. 12, Exh. A). A Second Amended Class Action Complaint (“Complaint”) was filed on August 3, 2007. (Docket No. 12, Exh. B).
1. The Fair and Accurate Credit Transactions Act (“FACTA”)
The Fair and Accurate Credit Transactions Act, 15 U.S.C. § 1681, was enacted on December 4, 2003 as an amendment to the Fair Credit Reporting Act, 15 U.S.C. § 1681. FACTA provides, in relevant part, for the truncation of credit and debit card numbers on customers’ receipts as follows:
(1) In general. Except as otherwise provided in this subsection, no person that accepts credit cards or debit cards for the transaction of business shall print more than the last 5 digits of the card number of the expiration date upon any receipt provided to the cardholder at the point of sale or transaction.
(2) Limitation. This subsection shall apply only to receipts that are electronically printed, and shall not apply to transactions in which the sole means of recording a credit card or debit card account number is by handwriting or by an imprint or copy of the card.
(3)Effective date This subsection shall become effective — •
(A) 3 years after December 4, 2003, with respect to any cash register or other machine or device that electronically prints receipts for credit card or debit card transactions that is in use before January 1, 2005; and
(B) 1 year after December 4, 2003, with respect to any cash register or other machine or device that electronically prints receipts for credit card or debit card transactions that is first put into use on or after January 1, 2005.
15 U.S.C.A. § 1681c. The statute further attaches liability for willful non-compliance of the statute:
Any person who willfully fails to comply with any requirement imposed under this subchapter with respect to any consumer is liable to that consumer in an amount equal to the sum of—
(1) (A) any actual damages sustained by the consumer as a result of the failure or damages of not less than $100 and not more than $1,000; or ...
15 U.S.C.A. § 1681n. 2 In signing the statute into law, President Bush commented:
... [T]his law will help prevent identity theft before it occurs, by requiring merchants to delete all but the last five digits of a credit card number on store receipts. Many restaurants and merchants have already adopted this practice. All will now do so.
“Remarks on the Signing of the Fair and Accurate Credit Transactions Act of 2003,” http://www.presidency.ucsb.edu/ws/index. php?pid=62888. The purpose of the FAC-TA amendments is to protect consumers from the potential of identity theft. Id. (“This bill ... confronts the problem of identity theft. A growing number of Americans are victimized by criminals who assume their identities and cause havoc in their financial affairs. With this legislation ... the Federal Government is protecting our citizens ... against identity theft.”); (Docket No. 10 at ¶ 14; Docket No. 23 at ¶ 14).
2. The Reed Litigation
The Reed Complaint specifically alleges that on March 14, 2007, after the effective date of the FACTA statute, Whole Enchilada provided Reed with an electronically printed receipt which included the expiration date of Reed’s credit or debit card at its McKnight Road location in Pittsburgh. (Docket No. 12, Exh. B at 67). The Complaint contains the following allegations:
35. Truncation standards, including the standards reflected in the Visa Merchant Rules and in FACTA, permit the publication of the last four or five digits of customer account numbers on the receipt presented to customers at the point of sale. The publication of this minimal amount of account information is necessary to facilitate merchant account reconciliation, processing of returns, etc. In isolation, the publication of only the last four or five digits of a customer account number significantly limits the extent to which a potential identity thief can effectively use customer receipts disseminated at the point of sale to facilitate identity theft.
36. However, the publication of expiration dates on customer receipts disseminated at the point of sale, in addition to the last four or five digits of the customer account number, exponentially increases the possibility of identity theft, which is the obvious reason that Visa, and then Congress, requires the truncation of expiration dates.
(Docket No. 12, Exh. B. at ¶¶ 35, 36). The Complaint further specifically alleges that Whole Enchilada:
68. ... at the point of sale or transaction with members of the class, provided either: a) through the use of a machine that was first put into use on or after January 1, 2005, at any time after such date; or b) through any machine at any time after December 4, 2006, each member of the class with one or more electronically printed receipts on each of which [Whole Enchilada] printed, for each respective class members, more than the last five digits of such member’s credit card or debit card number and/ or printed the expiration date of such member’s credit or debit card.
71. ... despite knowing and being repeatedly informed about FACTA and the importance of truncating credit card and debit card numbers and preventing the printing of expiration dates on receipts ...
74. ... willfully violated FACTA in conscious disregard of the rights of [Reed] and the members of the class to an increased risk of identity theft and credit and/ or debit card fraud.
(Docket No. 12 Exh. B at ¶¶68, 71-74). The Complaint sought, inter alia, statutory damages of, “not less than $100 and not more than $1000” for each violation, pursuant to the provisions of FACTA. Id. at ¶ 75.
A hearing was held before this Court regarding the proposed class action settlement agreement filed in the
Reed
litigation
3. Commercial General Liability Policies
In July 2005, Travelers issued Big Burrito Holding Company a commercial general liability insurance policy, bearing Policy No. Y-630-7883B69A-TIL-05. (Docket No. 12, Exh. C). The 2005 policy was effective for the policy period of July 1, 2005 to July 1, 2006. Id. Big Burrito Holding Company is the parent corporation for Whole Enchilada. (Docket No. 25 at ¶ 10; Docket No. 10 at ¶ 1).
Likewise, in July 2006, Travelers issued a commercial general liability insurance policy, bearing Policy No. 630-7883B69A-TIL-06. (Docket No. 12, Exh. D). The 2006 policy was effective for the policy period of July 1, 2006 to July 1, 2007. Id. Whole Enchilada is a named insured under both the 2005 and 2006 policies. (Docket No. 12, Exhs. C, D). Both policies were issued using a standard Commercial Liability Coverage Form, number CG 00 01 10 01, which was drafted by Insurance Services Organization (“ISO”). 3 (Docket No. 23 at ¶ 5; Docket No. 12, Exhs. C, D). Both the 2005 and 2006 policies include a WEB XTEND endorsement numbered CG DZ 34 1103 and CG DZ 01 05, respectively. Id. 4 , There is a dispute between the parties as to the potentially applicable policy provisions. (Docket No. 10 at ¶ 6; Docket No. 23 at ¶ 6). Specifically, there is an issue as to whether the Coverage “B” provisions of the standard insuring agreement are applicable or whether the WEB XTEND endorsement attached to the policies controls. (Docket No. 10 at ¶ 11; Docket No. 23 at ¶ ll). 5
The ISO form (“standard insuring agreement”) provides, in relevant part, as follows:
COVERAGE B PERSONAL AND ADVERTISING INJURY LIABILITY
1. Insuring Agreement
a. We will pay those sums that the insured becomes legally obligated to pay as damages because of “personal and advertising injury” to which this insurance applies. We will have the right and duty to defend the insured against any “suit” seeking those damages. However, we will have no duty to defend the Insured against any “suit” seeking damages for “personal and advertising injury” to which this insurance does not apply ...
Section V — DEFINITIONS
14. “Personal and advertising injury” means injury, including consequential “bodily injury”, arising out of one or more of the following offenses: ...
... e. Oral or written publication, in any manner, or material that violates a person’s right of privacy; ...
(Docket No. 12, Exh. G. at 22; Exh. D at 22). Furthermore, the WEB XTEND Endorsement further provides:
WEB XTEND LIABILITY
COVERAGE B. PERSONAL INJURY, ADVERTISING LIABILITY (SECTION I — COVERAGES) is Deleted in its entirety and replaced by the following:
COVERAGE B. PERSONAL INJURY, ADVERTISING INJURY AND WEB SITE INJURY LIABILITY
1. Insuring Agreement,
a. We will pay for those sums that the insured becomes legally obligated to pay as damages because of “personal injury”, “advertising injury” or “web site injury” to which this insurance applies. We will have the right and duty to defend the insured against any “suit” seeking those damages. However, we will have no duty to defend the insured against any “suit” seeking damages for “personal injury”, “advertising injury” or “web site injury” to which this insurance does not apply. ...
(Docket No. 12, Exh. V at 25-27; Exh. D at 25-28). The endorsement defines “advertising injury” and “personal injury” as follows:
SECTION V — DEFINITIONS
ADVERTISEMENT
The definition of “Advertisement” (Section V — DEFINITIONS) is deleted in its entirety.
ADVERTISING INJURY
The definition of “Advertising Injury” (Section V — DEFINITIONS) is deleted in its Entirety and replaced by the following:
1. “Advertising injury” means injury, arising out of one or more of the following offenses: ...
... b. 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; or ...
PERSONAL INJURY
The definition of “Personal Injury” (Section V — DEFINITIONS) is deleted in its entirety and replaced by the following:
“Personal injury” means injury, other than “bodily injury” arising out of one ore more of the following offenses: ...
e. 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.
(Docket No. 12, Exh. C at 25-27; Exh. D at 25-28).
4. The Instant Litigation
On March 28, 2007, Whole Enchilada provided notice of a claim for coverage from Travelers for the
Reed
litigation under the 2006 policy. (Docket No. 12, Exh. E). Thereafter, on May 3, 2007, Andrew Makar (“Makar”), the Director of Liability MCU for Travelers sent a reservation of rights letter
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to the Chief Finan
[a]ll of the allegations arise out of the alleged violation of the FACTA act. These allegations/ damages do not meet the definition of an occurrence, bodily injury, personal and advertising injury or property damage as defined by the policy; therefore none of the allegations contained in the complaint fall within the scope of coverage “A” or “B” insuring agreement.
(Docket No. 12, Exh. F). Furthermore, the letter contained the following provision:
[t]he failure of Travelers to point out any further terms, conditions or exclusions of its policy shall not waive any current or future rights of defense of Travelers pursuant to the Travelers, or an act to prevent Travelers from asserting such rights or defenses.
(Docket No. 12, Exh. F at 3).
Makar also sent an undated letter 7 addressed to Big Burrito, which clarified Travelers’ position with respect to coverage. Specifically, the letter stated that under the Coverage “A” and the WEB XTEND endorsement, there would be no coverage for the Reed litigation. (Docket No. 12, Exh. G). The letter again provides:
[a]ll of the allegations arise out of the alleged violation of the FACTA act. These allegations/ damages do not meet the definition of an occurrence, bodily injury, personal injury advertising injury or property damage as defined by the policy ... Even if they did, the complaint does not seek an award of covered damages under the policy. Plaintifffsic] seeks only statutory penalties, punitive damages, costs of suit and injunctive relief. Under these circumstances, the policy will not respond to any damages or verdict which may be rendered resulting from the allegations contained in this complaint.
Id. at 4. This letter also contained a reservation of rights provision. Id.
Thereafter, on August 3, 2007, Travelers forwarded a letter to Whole Enchilada’s counsel reiterating its position as to coverage. (Docket No. 12, Exh. H). Said letter states that the policy language under the standard insuring agreement pertaining to “personal and advertising injury” is inapplicable, insofar as the WEB XTEND endorsement “deletes coverage B of the ISO form in its entirety and replaces it with the language in the endorsement.” (Docket No. 12, Exh. H at 1).
Among other things, the endorsement separates the offenses of ‘personal injury’ and ‘advertising injury’. It also addsa third offense of ‘website injury’. All three offenses are defined to include the ‘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.’
(Docket No. 12, Exh. H at 1). The letter further clarifies that the Reed complaint alleges no offenses that fall within the offenses covered under the WEB XTEND endorsement. Id. The letter also contains the following reservation:
[t]his letter does not, nor is it intended to, waive any of the rights Travelers may have under the terms of the insurance policy issued to Whole Enchilada, Inc. or at law. This letter is not intended to be an exhaustive statement of all of the exclusions or conditions which may be applicable. All rights which Travelers may have under the terms of the insurance policy issued to Whole Enchilada, Inc. and at law are specifically reserved. We expressly do not waive our right to deny coverage for any other valid reason....
Id. at 2.
In response to Travelers’ August 3 letter, Whole Enchilada’s counsel sent a letter to Travelers explaining its position with respect to coverage. Specifically, in the letter Whole Enchilada contends:
[o]ne of the principal offenses for which both the WEB XTEND endorsement and the ISO form provide liability coverage concerns violations of individual privacy. Whether that coverage is couched in terms of unreasonable publicity given to a person’s private life or of the misappropriation of a person’s likeness (as it is in the WEB XTEND endorsement), or in terms of violation of a person’s right of privacy (as in the ISO form), the manifest purpose of the coverage is to protect the insured from liability predicated on exposure or appropriation of an individual’s identity and private affairs, including private financial affairs.
(Docket No 12, Exh. J at 3).
STANDARD
Summary judgment under Federal Rule of Civil Procedure 56(c) is appropriate “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.”
Woodside v. School Dist. of Philadelphia Bd. of Educ., 248 F.3d
129, 130 (3d Cir.2001) (citations omitted). In deciding a summary judgment motion, the court must “view the evidence ... through the prism of the substantive evidentiary burden” to determine “whether a jury could reasonably find either that the plaintiff proved his case by the quality and quantity of the evidence required by the governing law or that he did not.”
Anderson v. Consolidated Rail Corp.,
When the non-moving party will bear the burden of proof at trial, the moving party’s burden can be “discharged by ‘showing’ — that is, pointing out to the District Court — that there is an absence of evidence to support the non-moving party’s case.”
Celotex Corp. v. Catrett,
“In considering a motion for summary judgment, a district court may not make credibility determinations or engage in any weighing of the evidence; instead, the non-moving party’s evidence ‘is to be believed and all justifiable inferences are to be drawn in [their] favor.’ ”
Marino v. Industrial Crating Co.,
ARGUMENTS PRESENTED
In its reservation of rights letter (dated August 3, 2007) and Brief in Support of Motion for Summary Judgment, Travelers asserts that it does not have a duty to defend the Reed litigation based on the language of the WEB XTEND endorsement. (Docket No. 12, Exh. F; Docket No 26 at 3MJ Specifically, Travelers denied coverage under the “personal injury” provisions in the policies based on the following:
(1) The Reed Complaint alleges no violation of privacy as is required by the endorsement because it alleges no “publication” and no “publicity”. Therefore, the complaint alleges no “publicity to private” life and does not fall within coverage.
(2) The Reed Complaint alleges no “publication” or “appropriation” of Reed’s “likeness.”
(3) The Reed Complaint does not allege “injury” or “damage” potentially within the policy’s personal injury coverage.
(Docket No. 26 at 3-4). Conversely, in its Motion for Partial Summary Judgment and Reply to Travelers’ Motion for Summary Judgment, Whole Enchilada argues that Travelers does, as a matter of law, have a duty to defend under the personal injury provisions in the policy:
(1) The Reed Complaint alleges publication as defined by the endorsement.
(2) The Reed Complaint alleges unreasonable publicity to a person’s private life and the appropriation of a person’s likeness as provided by the policy.
(3) The Reed Complaint seeks “damages” within the meaning of the policy.
(Docket No. 9 at 12-19).
ANALYSIS
I. Choice of Law
A federal court sitting in diversity jurisdiction must apply the substantive law of the forum state,
Erie R.R. Co. v. Tompkins,
Furthermore, as the policies at issue are silent as to governing law, and both parties appear to implicitly agree that Pennsylvania law applies, the Court need not engage further in a choice of law analysis.
See Rochez Bros., Inc. v. North American Salt Co., Inc.,
Civ. A. No 94-1131,
II. Construction of an Insurance Policy
Under Pennsylvania law, interpretation of an insurance contract is a question of law that is properly decided by the court.
Gardner v. State Farm Fire and Casualty Co.,
When interpreting an insurance contract, the court must determine the intent of the parties “as manifested by the language of the written agreement.”
Travelers Casualty & Surety Co. v. Castegnaro,
In construing the language of an insurance policy, the Court must give effect to the reasonable expectations of the insured.
Millers,
III. Application of WEB XTEND Endorsement
Under Pennsylvania law, an endorsement “will be considered part of the insurance contract if it appears that the parties intended that is should be so considered.”
Young v. U.S. Fidelity & Guaranty Co.,
There appears to be no dispute that the WEB XTEND endorsement pertained to both policies as issue, and for the respective policy periods. However, Whole Enchilada contends that it is entitled to coverage under Coverage “B” of the Standard Agreement. It further argues that Travelers improperly attempts to limit coverage under the WEB XTEND endorsement, given that the endorsement purports to extend, not narrow, the coverage provided by the standard insuring agreement. (Docket No. 9 at 2; Docket No. 32 at 5). Specifically, Whole Enchilada argues:
[T]his coverage was provided pursuant to a “WEB XTEND” endorsement, which was represented as an extension of coverage. Without the WEB XTEND endorsement, Travelers’ standard policy form covered violations of a person’s ‘right of privacy.’ Hence, the standard form would have covered this claim. To deny coverage under the WEB XTEND endorsement would yield the perverse result that an endorsement purporting to “extend” coverage instead (i) fundamentally narrowed it and (ii) did so sub silentio.
(Docket No. 9 at 2-3) (emphasis in original). Furthermore, Whole Enchilada asserts that it received no disclosure stating that the endorsement in any way restricts coverage. (Docket No. 32 at 5). Travelers, in response, argues that the WEB XTEND endorsement effectively changed the terms of the policy by replacing the Coverage “B” provision of the Standard Agreement. (Docket No. 26 at 28) (“The endorsement clearly, and indeed conspicuously, states that it ‘CHANGES THE POLICY.’ ”) Travelers further argues:
[e]ven if it could read out of the policy the WEB XTEND Liability Endorsement, [Whole Enchilada] would still need to prove coverage under Coverage B of the Standard Agreement ... Apart from any other policy requirement, the starting point for Whole Enchilada’s “unquestionable coverage” argument would be the basic form’s provision that the alleged conduct must “violate a person’s right of privacy.” ... [T]he Reed Complaint alleges no violation of any right of privacy.
(Docket No. 26 at 29).
As to whether the WEB XTEND endorsement effectively changes the terms of the policy, the Court here agrees with Travelers that the endorsement effectively replaces the terms of Coverage “B”:
The WEB XTEND endorsement provides as follows:
THIS ENDORSEMENT CHANGES THE POLICY, PLEASE READ IT CAREFULLY.
WEB XTEND LIABILITY
This endorsement modifies insurance provided under the following:
COMMERCIAL GENERAL LIABILITY COVERAGE PART PROVISIONS
Paragraph o. Personal and Advertising Injury, Part 2. Exclusions of SECTION I — COVERAGES, COVERAGE A BODI
o. Personal Injury, Advertising Injury and Web Site Injury
“Bodily Injury” arising out of “personal injury” “advertising injury” or “webite injury”.
COVERAGE B. PERSONAL INJURY, ADVERTISING LIABILITY (SECTION I — COVERAGES) is Deleted in its entirety and replaced by the following:
COVERAGE B. PERSONAL INJURY, ADVERTISING INJURY AND WEB SITE INJURY LIABILITY
1. Insuring Agreement.
a. We will pay for those sums that the insured becomes legally obligated to pay as damages because of “personal injury”, “advertising injury” or “web site injury” to which this insurance applies. We will have the right and duty to defend the insured against any “suit” seeking those damages. However, we will have no duty to defend the insured against any “suit” seeking damages for “personal injury”, “advertising injury”, or “web site injury” to which this insurance does not apply....
SECTION V — DEFINITIONS
ADVERTISEMENT
The definition of “Advertisement” (Section V — DEFINITIONS) is deleted in its entirety and replaced by the following:
1. “Advertising injury” means injury, arising out of one or more of the following offenses: ...
... b. 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; or ...
Personal Injury
The definition of “Personal Injury” (Section V — DEFINITIONS) is deleted in its entirety and replaced by the following:
“Personal injury” means injury, other than “bodily injury” arising out of one or more of the following offenses: ...
e. 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.
(Docket No. 12, Exh. C at 25-27; Exh. C at 25-28).
The WEB XTEND endorsement unambiguously states that the endorsement “changes the policy.” The plain language of the endorsement provides that the endorsement modifies insurance provided under Coverage “B”. There is no ambiguity in the language purporting to change the Coverage “B” provisions of the standard insuring agreement, which provides: “[tjhis endorsement modifies insurance provided under the following: ... Coverage “B” Personal and Advertising Injury (Section I Coverages) ... this section is deleted in its entirety and replaced ...” (Docket No. 12, Exh. C at 25). While there is a dispute between the parties as to whether the endorsement purports to extend or narrow coverage, the Court must look at the plain language of the agreement,
Castegnaro,
Furthermore, under Pennsylvania law, the Court must read the endorsement as part of the contract between the parties.
Young,
Section V — DEFINITIONS
14. “Personal and advertising injury” means injury, including consequential “bodily injury”, arising out of one or more of the following offenses: ...
... e. Oral or written publication, in any manner, or material that violates a person’s right of privacy; ...
The endorsement, in contrast provides, in relevant part:
The definition of “Personal Injury” (Section V — DEFINITIONS) is deleted in its entirety and replaced by the following:
“Personal injury” means injury, other than “bodily injury” arising out of one or more of the following offenses: ...
e. 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.
Under Pennsylvania law, the language of the endorsement prevails and the terms of the endorsement determine coverage, and effectively change the terms of the standard insuring agreement. Id.; see also CouCH ON INSURANCE, § 18:17. 8
Furthermore, while credit must be given to the reasonable expectations of the insured,
see Millers,
IV. Duty to Defend v. Duty to Indemnify
A. Duty to Defend
Under Pennsylvania law, the duty to defend is broader than an insurer’s duty to indemnify.
Erie Insurance Exchange v. Muff,
B. Duty to Indemnify
An insurer’s duty to indemnify is separate and distinct from its duty to defend.
Key Handling Systems, Inc. v. W.C.A.B.,
V. Travelers’ Alleged Duty to Defend the Reed Litigation
Whole Enchilada argues that the
Reed
Complaint triggers a duty to defend under the personal injury provision of the WEB XTEND endorsement. (Docket No. 9). Specifically, Whole Enchilada argues that, in interpreting liability coverage for personal injury, the Court should not read the policy so narrowly as to cover only the common law tort meaning of the provisions providing coverage for personal injury. (Docket No. 32 at 12-13) (citing
Granite State Insurance Co. v. Aamco Transmissions, Inc.,
Pennsylvania courts have held that personal injury coverage under a commercial liability policy is not limited to the common law tort meaning of a policy’s language. In
Granite State Insurance Co. v. Aamco Transmissions, Inc.,
Likewise, in this case, while the Court agrees that a statutory violation under FACTA
could potentially
fall within the personal injury provisions at issue, the alleged statutory violation must still trigger coverage under the plain language of the policy.
Granite State,
In interpreting the provisions of “personal injury” under a commercial liability policy, the Pennsylvania Superior Court has held that a:
personal injury endorsement extends liability coverage to the specific torts there enumerated. It affords coverage onlyfor defined risks. These include torts of a recognized type involving damages which can be lumped under the descriptive term personal injury.
O’Brien Energy Systems, Inc. v. American Employers’ Insurance Co.,
A “Publication”
Whole Enchilada argues that the Reed Complaint alleges “publication” (1) of “material that appropriates a person’s likeness” and (2) material that “gives unreasonable publicity to a person’s private life” and, therefore, it is entitled to coverage for the Reed Complaint under the terms of the WEB XTEND endorsement:
Travelers cannot avoid its obligation to provide coverage for claims ‘arising out of ... [o]ral, written or electronic publication of material that ... gives unreasonable publicity to a person’s private life.’ ... [T]he policies embrace statutorily created offenses that fall within the scope of the Policies’ terms.... According to the Reed Complaint, Whole Enchilada allegedly published receipts that, in Congress’ judgment, improperly divulged too much personal financial information and revealed the cardholder’s financial identity.
(Docket No. 32 at 5).
Admittedly, the policy provides coverage for personal injury arising out of “oral, written or electronic publication of material ...” There appears to be no dispute that the printing of a receipt is “written material.” However, there is an issue as to whether the printing of a receipt is written “publication” for purposes of coverage. In response to Whole Enchilada’s argument that the Reed Complaint sufficiently alleges “publication,” Travelers argues that the Reed Complaint fails to allege “publication” under the plain meaning of that term, as interpreted under Pennsylvania law. (Docket No. 26 at 14). Specifically, Travelers contends “publication cannot mean handing a receipt to a single person; nor can it mean handing a receipt to someone who already knows the information printed on it.” (Docket No. 26 at 14).
Whole Enchilada, however, contends that the
Reed
Complaint alleges publication, insofar as the Complaint avers that Whole Enchilada printed the last five digits of the
Reed
plaintiffs’ credit or debit card number and/ or printed the expiration date in violation of FACTA, thereby exposing the
Reed
plaintiffs to the potential of identity theft. (Docket No. 9 at 12-13). Therefore, Whole Enchilada argues, the Complaint triggers a duty to defend under the terms of the endorsement. (Docket No. 9 at 12) (“The alleged violation of FACTA arises out of the printing of a credit card receipt that does not truncate the requisite, private information. Consistent with the
Reed
Complaint, the printing of such a receipt in a restaurant makes this private information public. By definí
The policy provides coverage for “oral, written or electronic publication of material ...” The word “publication” is not defined by the policy. Accordingly, Whole Enchilada argues that the meaning of “publication” appears to be ambiguous as applied to a FACTA violation, insofar as some courts have interpreted “publication” to mean providing information to one individual alone, as opposed to the public at large. (Docket No. 9 at 12).
“When interpreting the language of an insurance policy, the words must be construed in their ‘natural, plain and ordinary sense.’ ”
Tyler v. Motorists Mutual Insurance Co.,
The plain meaning of the term publication is found under “publish”: “1. a.: to make generally known b.: to make public announcement of; 2. a. to disseminate to the public b: to produce or release for distribution.” Merriam-Webster Dictionary, Online Ed. (2008) (last visited September 29, 2008). Black’s Law Dictionary defines “publication” as “1. Generally, the act of declaring or announcing to the public.” Blacx’s Law Dictionary, 8th Ed. at 1261 (2004). In this case, the Reed Complaint alleges that “[Whole Enchilada], at the point of a sale or transaction with members of the class, provided ... one or more electronically printed receipts on each of which Defendants printed, for each respective class member, more than the last five digits of such member’s credit card or debit card number ...” (Docket No. 12, Exh. B at ¶ 68) (emphasis added). As such, the Complaint alleges only that the information printed on the receipt was handed to the class member at the point of sale and does not allege that the cardholder’s information was in any way made generally known, announced publicly, disseminated to the public, or released for distribution. A receipt is a record of a point of sale transaction, and, as the Complaint alleges, is “provided to” the cardholder. (See Docket No. 12, Exh. B at ¶ 55). The Complaint only alleges that the information was provided to Reed and the class members in violation of FACTA. Id. It does not allege that Whole Enchilada is liable for “publication,” 10 as the printed receipts are not made generally known, publicly announced, nor disseminated to the public. The Court finds that there is no coverage for the Reed litigation under the provision that provides coverage for “publication of material that appropriates a person’s likeness ... or gives unreasonable publicity to a person’s private life, insofar as there is no allegation of “publication.” ”
To the extent that Whole Enchilada maintains coverage exists if publication is read to mean production or release for distribution, the Court finds that argument to be unpersuasive. Indeed, under the plain language of this policy, there is no ambiguity in the meaning of “publication,” when the word is read in the context of the
e. 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.
(Docket No. 12, Exh. C at 25-27; Exh. D at 25-28) (emphases added).
B. “Publication of Material that Appropriates a Person’s Likeness”
The policy first provides coverage for “oral or written publication of material that appropriates a person’s likeness.” (Docket No. 12, Exh, C at 25-27; Exh. D at 25-28). Whole Enchilada argues specifically:
An individual’s private financial information is part and parcel of his or her “identity.” Thus, the central thrust of the Reed Complaint-appropriation of private financial information — is directed to the central interest protected by the statute — the interest of the individual in the exclusive use of his or her own identity, or “likeness.”
(Docket No. 9 at 15).
While Whole Enchilada’s argument here is thought-provoking, it stretches, not only beyond the plain language of the policy, as well as settled Pennsylvania law, it also stretches beyond any reasonable expectation of coverage under this provision. The term “appropriation of a person’s likeness” is unambiguous. Appropriation of a person’s likeness, by definition under Pennsylvania law, is use of a person’s actual physical likeness to the benefit of the defendant without permission. Restatement 2d TORTS § 652C;
see also Seale v. Gramercy Pictures,
A main provision of FACTA ... provides that:
No person that accepts credit cards or debit cards for the transaction of business shall print more than the last five digits of the card number or expiration date upon any receipt provided to the cardholder at the point of sale or transaction ...
... [Whole Enchilada] ha[s] willfully violated this law and failed to protect [Reed] and others similarly situated against identity theft and credit card and debit card fraud by continuing to print more than the last five digits of the card number and/ or the expiration date on the receipts provided to debit card and credit cardholders transacting business with [Whole Enchilada].
(Docket No. 12, Exh. B at ¶¶ 2-3) (emphasis added). The Complaint alleges only that Whole Enchilada failed to protect Reed from credit or debit card fraud by failing to truncate the requisite numbers, not that Whole Enchilada wrongfully used Reed’s information in any way. (Docket No. 12, Exh. B). The Complaint alleges that, at the point of sale, meaning at the point where Reed handed over his card for
C. “Publication of material that ... gives unreasonable publicity to a person’s private life’’
Furthermore, the underlying
Reed
Complaint does not allege “oral, written or electronic publication of material that ... gives unreasonable publicity to a person’s private life.” There is an issue between the parties as to the meaning of “publicity” under this provision. While the policy does not define the term “publicity” explicitly, like the term “publication,” the meaning of the term “publicity” is well defined under Pennsylvania law. Under Pennsylvania tort law, “publicity” “requires that the matter be made public, by communicating it to the public at large, or to so many persons that the matter must be regarded as substantially certain to become public knowledge.”
Harris by Harris v. Easton Publishing Co.,
The underlying complaint must allege factual allegations that fall within the policy language.
Mutual Benefit Ins. Co.,
While Whole Enchilada notes that the enactment of FACTA was to prevent identity theft and further argues that the truncation provision was enacted to protect a privacy right of consumers, (Docket No. 9 at 15-16), the Court notes that a violation of the truncation provision of FACTA is not, as Whole Enchilada suggests, a publication or an invasion of an individual’s privacy right. Rather, the truncation provision is applicable only to electronically
In the context of the factual scenario surrounding Whole Enchilada’s alleged violation of this provision of FACTA, the Court’s reasoning becomes clear. At the point of sale transaction, a cardholder gives his or her credit or debit card to the individual at the cash register. The credit information is exchanged between the cardholder, Whole Enchilada and the cardholder’s bank. There is no violation of a privacy right, insofar as the cardholder willfully gives over his or her credit information to Whole Enchilada so that the information can be used to process the sale. This factual scenario does not meet the requirement of publicity under the policies.
Furthermore, the case law cited by Whole Enchilada in support of its contention that publicity does not necessarily require some type of dissemination to the public is inapposite to the instant matter. In
Park University Enterprises v. American Casualty Co. of Reading,
Likewise, in
Park University Enterprises,
the Court looked at policy language which provided coverage for publication of material “that violates a person’s right of privacy.”
Park University,
The underlying litigation in this case, however, alleges no violation of a privacy right, and no general communication of private information, nor does the Complaint allege that the FACTA truncation provisions protect a privacy right. Rather, the Complaint alleges that the truncation provision was enacted to
prevent potential
identity theft, and that, in failing to truncate properly, "Whole Enchilada failed to protect the class members from
potential
identity theft. (Docket No. 12, Exh. B at ¶¶ 36, 74). Furthermore, in
Melrose Hotel,
the District Court for the Eastern District of Pennsylvania, interpreting Pennsylvania law, held that the purpose of the TCPA was to take “aim at the intrusive nature of unsolicited faxes.... But neither the telemarketer’s call nor the unsolicited fax implicate the disclosure of personal information.”
Melrose Hotel Co. v. St. Paul Fire and Marine Insurance Co.,
The Court predicts that, given the meaning of “publicity” in the context of Pennsylvania law and the language of the policy, coverage pursuant to “publication of material ... that gives unreasonable publicity to a person’s private life” is not triggered by an alleged FACTA violation. Moreover, Whole Enchilada, as a commercial insured, could not reasonably expect that the language providing coverage for “material that ... gives unreasonable publicity to a person’s private life” would provide coverage for an allegation that Whole Enchilada gave cardholders receipts without truncating credit or debit card numbers. More specifically, the plain language “material that ... gives unreasonable publicity to a person’s private life” clearly requires an allegation that an individual’s private information was somehow made known to the public. Here, there is no allegation that such disclosure was made in the underlying Complaint. (Docket No. 12, Exh. B).
D. “Damages”
In regard to Travelers’ argument that the Reed litigation fails to allege “damages” as covered under the policies, the Court finds that the damages alleged in the
Reed
Complaint, as a result of the alleged FACTA violation, are not covered under the policy. In making this determination the Court reads the allegations of the Complaint against the policy language.
Mutual Benefit Insurance Co. v. Haver,
First, the Court looks to the damages allegations contained in the Complaint. The Reed Complaint seeks, inter alia, the following relief:
a. An award to Plaintiff and the members of the class of statutory damages pursuant to 15 U.S.C. § 1681n(a)(l)(A) for [Whole Enchilada’s] willful violations (up to but not exceeding the fullest extent allowed under the Constitution of the United States);
b. An award to Plaintiff and the members of the class of punitive damages pursuant to 15 U.S.C. § 1681n(a)(2) (up to but not exceeding the fullest extent allowed under the Constitution of the United States); ...
(Docket No. 12, Exh. B at 19).
Secondly, the Court looks to the pertinent policy language. The WEB XTEND endorsement provides coverage for “damages” as follows:
SECTION I — COVERAGES ...
SUIT
The definition of "Suit” (SECTION V-DEFINITIONS) is deleted in its entirety and replaced by the following:
"Suit” means civil proceeding in which damages because of "bodily injury”, “property damage”, “personal injury”, "advertising injury” or "web site injury” to which this insurance applies are alleged. "Suit” includes:
a. An arbitration proceeding in which such damages are claimed and to which you must submit or do submit with our consent; or
b. Any other alternative dispute resolution proceeding in which such damages are claimed and to which you submit with our consent.
COVERAGE B PERSONAL INJURY, ADVERTISING INJURY AND WEB SITE INJURY LIABILITY
1. Insuring Agreement
a. We will pay those sums that the insured becomes legally obligated to pay as damages because of “personal injury” “advertising injury” or “web site injury” to which this insurance applies. We will have the right and duty to defend the insured against any “suit” 12 seeking those damages. However, we will have no duty to defend the insured against any “suit” seeking damages for “personal injury” or “advertising injury,” or “web site injury” to which this insurance does not apply. We may, at our discretion, investigate any “occurrence” or offense and settle any claim or “suit” that may result. But ...
(1) The amount we will pay for damages is limited as described in Section III — Limits Of Insurance; and
(2) Our right and duty to defend end when we have used up the applicable limit of insurance in the payment of judgments or settlements under Coverage A or B or medical expenses under Coverage C.
No other obligation or liability to pay sums or perform acts or services is covered unless explicitly provided for under Supplementary Payments — Coverages A and B.
b. This insurance applies to:
(1) “Personal injury” caused by an offense arising out of your business, excluding advertising, publishing, broadcasting or telecasting done by or for you; ...
The term “damages” is not defined in the policy. Therefore, the Court turns to Pennsylvania case law, as well as the plain meaning of the term.
Castegnaro,
The Complaint explicitly alleges that Whole Enchilada had knowledge of the FACTA truncation provisions through extensive distribution of information related to the enactment of the statute. (Docket No. 12, Exh. B at ¶¶ 19-31, 34-35). The Complaint avers that:
[Whole Enchilada] had actual knowledge of FACTA’s truncation requirements, specifically including the requirement that credit and debit card expiration dates be truncated on receipts presented to consumers at the point of sale ... Despite knowing and being repeatedly informed about FACTA and the importance of truncating credit card and debit card numbers and preventing the printing of expiration dates on receipts, and despite having had up to more than three years to comply with FACTA’s requirements, [Whole Enchilada] willfully violated and continues to violate FACTA’s requirements by, inter alia, printing more than five digits of the card number and/ or the expiration date upon the receipts provided to members of the classpersons with whom [Whole Enchilada] transacts business.
(Docket No. 12, Exh. B at ¶¶ 33, 71). The statutory and punitive damages sought in the Reed Complaint are based on its allegations of Whole Enchilada’s willful violation or -wrongdoing.
1. Statutory Damages'
For purposes of interpreting an insurance policy, “ *[d]amages,’ as a legal term, generally has been interpreted to refer to awards of compensation.” Norton on InsuranCE Coverage at § 15.D(2) (citing
e.g. United States v. Price,
“Statutory” damages are distinguished from the legal meaning of “damages,” generally. BlaCKS Law Dictionary 8th Ed. at 419 (defining “statutory damages” as “damages provided by statute ... as distinguished from damages provided under the common law”). Statutory damages are generally awarded in place of actual damages, where no actual injury is alleged.
See e.g. Planned Parenthood of Southeastern Pa., Inc. v. Walton,
No. Civ. A. 95-2813,
In this case, the damages sought in the allegations of the Complaint are not damages for actual sustained injury, but rather, are sought pursuant to the provisions of FACTA, which prescribe statutory damages where no actual damage is alleged. (Docket No. 12, Exh. B at 19); 15 U.S.C. § 1681n(a)(l)(A). However, the plain meaning of the term “damages” is “compensation for a loss or injury sustained by the plaintiff.”
Miller,
Moreover, under Pennsylvania law, damages arising from conduct in which a defendant intentionally violates the rights of the plaintiff are not covered under a commercial generally liability policy, as a matter of public policy.
See Aetna Casualty & Surety Co. v. Roe,
2. Punitive Damages
Likewise, it is generally against public policy in Pennsylvania to provide coverage for punitive damages.
See Aetna Cas. & Sur. Co.,
The
Reed
Complaint alleges more than “wanton misconduct;” it alleges a willful violation of a statute. (Docket No. 12, Exh. B at ¶¶ 33, 71) (“[Whole Enchilada] willfully violated and continues to violate FACTA’s requirements.... [Whole Enchilada] willfully violated FACTA in
conscious disregard of the rights of [Reed]”)
(emphasis added). It does not, however, seek any actual damages. (Docket No. 12, Exh. B at 19). Accordingly, the Court predicts that under Pennsylvania law, public policy does not permit Whole Enchilada to shift its burden of paying for its willful
3. Damages in the Context of Personal Injury under the Policy Language
There is no coverage for the alleged damages in Reed, when the term “damages” is read in the context of the entire policy provisions providing coverage for “personal injury.” The language of the policy provides that Travelers “will pay for those sums that the insured becomes legally obligated to pay as damages because of ‘personal injury’ ... to which this insurance applies.” (Docket No. 12, Exh. C at 25-27; Exh. D at 26-28) (emphasis added). []The policy provides, “[w]e will pay for those sums that the insured becomes legally obligated to pay as damages because of ‘personal injury1 ...” (Docket No. 12, Exh. C at 25-27; Exh. D at 25-28). Reading the term “damages” in the context of the entire policy, even if the Court were to have found “damages” to potentially include the claimed statutory and punitive damages, it is not enough that the underlying complaint allege “damages.” Rather, the Complaint must allege “damages ... because of ‘personal and advertising injury’ to which this insurance applies. ‘Personal and advertising injury’ means injury arising out of ... oral or written publication of material that appropriates a person’s likeness ... or gives unreasonable publicity to a person’s private life.” (Docket No. 12, Exh. At 25-27; Exh. D at 25-28) (emphasis added). As discussed above, the allegations in the Reed Complaint do not fit the description of injury “arising out of oral or written publication of material that appropriates a person’s likeness ... or gives unreasonable publicity to a person’s private life.”
As such, the Court finds that the claim for statutory and punitive damages arising out of the alleged FACTA violation are not the type of “damages” covered under the terms of the subject policies.
VI. Travelers’ Alleged Duty to Indemnify
As to Travelers’ duty to indemnify, the WEB XTEND Endorsement states:
a. We will pay for those sums that the insured becomes legally obligated to pay as damages because of “personal injury” ...
... arising out of one or more of the following offenses:
e. 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.
As noted above, an insurer’s duty to defend is broader than its duty to indemnify.
J.H. France Refractories Co. v. Allstate Insurance Co.,
CONCLUSION
For the foregoing reasons, the Court grants Travelers’ Motion for Summary Judgment and denies Whole Enchilada’s Partial Motion for Summary Judgment. An appropriate Order follows.
Notes
. The Court notes that Whole Enchilada’s complaint seeks a declaratory judgment as to both Travelers' duty to defend and duty to indemnify. (Docket No. 1). However, in its Motion for Partial Summary Judgment, Whole Enchilada seeks judgment only as to Travelers’ duty to defend. (It should be further noted that said motion was filed prior to this Court’s final approval of a class action settlement in a related action at Civil Action 07-cv-0357 on March 21, 2008.) In its Memorandum of Law in Support of Motion for Partial Summary Judgment Whole Enchilada states: "[ujpon approval of the settlement in the Reed litigation, Whole Enchilada also will seek summary judgment against Travelers for indemnification of amounts paid in connection with that settlement.” (Docket No. 9, at 2, n. 2). However, no such motion has been filed.
. On June 3, 2008 15 U.S.C. § 1681n was amended to limit the definition of "willful noncompliance'' to remove from coverage of the statute the printing of an expiration date on a receipt by the "Credit and Debit Card Receipt Clarification Act of 2007”, 15 U.S.C. § 1681n, as amended. See Pub.L. 110-241, § 3(a). As such, compliance with the provision requiring the truncation of the last five digits of the credit/debit card number will constitute willful noncompliance under the statute, but printing an expiration date only will not. The amendment applies retroactively from the effective date of FACTA, December 4, 2004. Id.
.ISO is a corporation that provides insurance products and services to property and casualty insurers and reinsurers. See ISO’s website, at http://www.iso.com/index. The organization provides, among many other services, underwriting information and services, information regarding policy language and rules and information regarding commercial general liability policies. Id.
. The Coverage B provisions and the WEB XTEND provisions in the 2005 and 2006 policies are identical. (Docket No. 12, Exhs. C, D; Docket No. 9 at 4, n. 4). Therefore, the 2005 and 2006 policies, unless otherwise specified, will hereinafter be referred to collectively as "policy.”
. The Court will discuss the applicability of the WEB XTEND endorsement in its foregoing analysis.
. "A reservation of rights is unilateral, written notice from the insurer to the policyholder that the insurer may disclaim coverage for one or more claims in issue based on terms of the insurance policy, legal principles precluding coverage, violation of policy provisions by the insured, or some combination of these factors.” Norton on Insurance Coverage in Pennsylvania 2d Ed. § 1C(1). In Pennsylvania, an insurer has not prejudiced its defense by denying coverage under an inapplicable policy provision.
Id.
(citing
Nationwide Mut. Ins. Co. v. Nixon,
. The letter, filed at Exhibit G to Whole Enchilada’s motion for summary judgment is not dated. (Docket No. 12, Exh. G). It is, however, date stamped as received on May 7, 2007 by Whole Enchilada's broker. Id. The Court notes that, in its motion, Whole Enchilada contends that only its broker and neither Docherty, nor Whole Enchilada’s counsel, received this letter, and, as a result of the “contradictions” in the May 3 and May 7 letter, it incurred additional expenses. (Docket No. 9 at 9). However, both the May 3 and May 7 letter contain the above mentioned reservations of rights provisions. (Docket No. 12, Exh. F; Exh. G).
. Moreover, in regard to the applicability of the endorsement, the Court notes that the policies were issued by Travelers to Whole Enchilada in July of 2005 and 2006, respectively. Therefore, both policies were issued after December 4, 2004,
i.e.,
after FACTA became effective. "A contract incorporates the laws that exist at the time the contract is made, and a contract will be construed according to the law of the state”, as interpreted by its courts, at the time the contract was made.
AK Steel Corp. v. Viacom,
Furthermore, the Court opines that Travelers’ underwriter knew or should have known of the existence of FACTA, and the policy would have been written against that backdrop. Flowever, because the parties chose not to complete discovery, the Court is not privy to any information pertaining to the drafting of the policies, or the intentions of the underwriter in changing the terms of Coverage “B”. Nor does the Court have before it any information from the broker or the insured. The Court has only what the parties have offered on the record as evidence of the parties’ intentions, i.e., the policies. Under the plain language of the policies, the Court finds that the language of the endorsement unambiguously changes the terms of the standard insuring agreement.
. In particular, Whole Enchilada used the brokerage firm of Simpson and McCready, LLC (Docket No. 12, Exh. C at 1 of 1). Whole Enchilada’s use of a broker impugns Whole Enchilada’s argument that it could not reasonably expect that the WEB XTEND en
. The Court notes that while, at certain portions of the
Reed
Complaint, the word "publication” is used, the Court must look to the actual factual allegations of the complaint, and not merely the words used in the complaint.
Mutual Ben. Ins. Co. v. Haver,
. While the Reed Complaint makes specific allegations as to the importance of the truncation provision of FACTA to prevent identity theft (Docket No. 12, Exh. B at ¶¶ 42-43), the complaint does not allege that any identity theft occurred. More specifically, while the Reed Complaint discusses the potential threat of identity theft: "a would be identity thief who steals a receipt containing the last four or five digits of a credit card account number and an expiration date can use that data in an attempt to dupe the cardholder,” no allegation of any such theft or use of the information “in an attempt to dupe the cardholder” is alleged against Whole Enchilada. (Docket No. 12, Exh. B at ¶ 46). Further, at the hearing approving the settlement in the underlying class action, (Civ. Action No. 07-00357, Docket No. 53 at 35, 36), this Court was advised that no identity theft had occurred to that date.
. "Suit” is defined in the policy as follows:
. Furthermore, while neither party addresses this argument, this policy contains an exclusion for "Knowing Violation of Rights of Another”:
2. Exclusions.
This insurance does not apply to:
a. Knowing Violation Of Rights Of Another "Personal injury,” "advertising injury” or "web site injury” caused by or at the direction of the insured with the knowledge that the act would violate the rights of another and would inflict "personal injury,” "advertising injury” or “web site injury”....
(Docket No. 12, Exh. C at 1 of 4).
In the Court’s opinion, this exclusion could be potentially applicable to further support denial of this claim, insofar as the Complaint alleges that Whole Enchilada knowingly violated the rights of the plaintiffs in violating FACTA.