If an original check had a security feature that did not survive when the substitute check was created and a loss occurred due to the lack of that feature who is liable?
Check 21 does not expressly address issues relating to security features on substitute checks. The aggrieved party may, depending on the facts and circumstances, have a claim under the Act’s indemnity provisions against any indemnifying bank, because the loss arguably would not have occurred if the aggrieved party had received the original check instead of the substitute check. The loss of the security feature also may involve a warranty breach if it is determined that because of that lost security feature the substitute check did not accurately represent all of the information on the front and back of the original check as of the time it was truncated. It is anticipated that image and substitute check survivable security features will be developed to replace existing security features that will not survive to the substitute check.
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