Gift card does not fall in policy contractual exclusion

Patrick Bracher

When Abercrombie & Fitch was sued in three class actions for failing to honour promotional gift cards the court refused to find that the policy exclusion of liability under third-party contracts applied and held that the insurers were liable to provide a defence because the claimants had based the claim on statutory consumer fraud as well as a contract breach.

During 2009 Abercrombie gave $25 promotional gift cards to customers, which included the phrase “no expiration date” and others included no expiration information. Abercrombie later refused to honour the cards and three consumer class actions were lodged. Abercrombie claimed under its Advertisers and Internet Liability policy with ACE.

The insurers contended the claims fell within the exclusions for damages arising from contract and damages arising from coupons and discounts. Because the class actions alleged consumer fraud ACE was obliged to defend its insured because the claims were not only based on contract. The gift cards were also not coupons linked to any particular product because they were a form of a tender for customers to use for value in future.

First published by: Financial Institutions Legal Snapshot