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Cachet Financial Services: U.S. District Court finds No Coverage under Commercial Crime Policy for Alleged ACH Kiting and Related Frauds
By Chris McKibbin and Daniel Silla In the recent decision of Cachet Financial Services v. Berkley Insurance Company, the United States District Court for the Central District of California found no coverage under a commercial crime policy in respect of several alleged frauds involving a payroll processor. The decision is instructive for fidelity claims professionals as to the meaning of “alteration” in the Forgery insuring agreement found in commercial crime and financial institutions coverages. The decision also reinforces existing jurisprudence that restricts the Computer Fraud insuring agreement to situations involving “hacking” and unauthorized access, rather than fraudulent misuse of
Sportsinsurance.com: Second Circuit applies Suit Limitation Period to Dismiss Action on Commercial Crime Policy
By Chris McKibbin and Devra Charney On November 4, 2022, the Second Circuit Court of Appeals released its decision in Sportsinsurance.com, Inc. v. The Hanover Insurance Company, Inc. The Court applied a commercial crime policy’s suit limitation period in finding that an insured’s coverage action was not timely. Critically, the Court also rejected the insured’s waiver and estoppel arguments which were premised on alleged communications by the insurer. The Facts In January 2016, Sportsinsurance.com, Inc. (“Sportsinsurance”) discovered that its Chief Financial Officer, Baroudi, was embezzling from the company. Sportsinsurance believed that Baroudi’s embezzlement constituted a loss under the commercial
Star Title Partners: Eleventh Circuit finds No Coverage for Social Engineering Fraud Loss under Cybercrime Endorsement to Cyber Protection Policy
By Chris McKibbin and Devra Charney On September 6, 2022, the Eleventh Circuit Court of Appeals released its decision in Star Title Partners of Palm Harbor, LLC v. Illinois Union Insurance Company. In deciding that a social engineering fraud (SEF) loss did not fall within the coverage afforded under a Deceptive Transfer Fraud insuring clause, the Court construed the terms “employee,” “customer,” “client” and “vendor” according to their ordinary meanings. As the entity impersonated by the fraudster did not qualify as an employee, customer, client or vendor of Star Title, no coverage was available. The decision is notable as
SJ Computers: U.S. District Court finds No Coverage for Business Email Compromise Loss under Computer Fraud Coverage
By Chris McKibbin and Daniel Silla On August 12, 2022, the U.S. District Court for the District of Minnesota released its decision in SJ Computers, LLC v. Travelers Casualty and Surety Company of America. In finding that an alleged business email compromise loss did not fall within a crime policy’s Computer Fraud coverage, the Court provided instructive commentary regarding the policy’s direct loss requirement. The decision is notable in holding that the alleged hacking of an insured’s email system did not bring the loss within the Computer Fraud coverage grant, as the immediate cause of the loss was the
RealPage: U.S. District Court finds Funds lost by Third Party Payments Processor do not meet Commercial Crime Policy’s Ownership Condition
In the recent decision of RealPage Inc. v. National Union Fire Insurance Company of Pittsburgh, Pa,, the U.S. District Court for the Northern District of Texas held that funds lost by a third party payments processor as a result of a phishing scheme perpetrated on an insured did not meet the commercial crime policy’s ownership condition. The Court found that the “hold” requirement of the condition requires possession of funds, as opposed to the ability to direct the movement of funds. The Court also held that RealPage’s after-the-fact reimbursements to its clients did not constitute a “direct loss” under
Mississippi Silicon: Fifth Circuit finds No Coverage for Social Engineering Fraud Loss under Crime Policy’s Computer Fraud Coverage
On February 4, 2021, the Fifth Circuit Court of Appeals released its decision in Mississippi Silicon Holdings, LLC v. AXIS Insurance Company. In affirming the lower court’s grant of summary judgment in favour of AXIS, the Fifth Circuit made important findings regarding the proper scope of the Computer Fraud coverage; whether a fraudster’s opening of a “fraudulent channel” in an insured’s email system meets the requirements of that coverage; and whether it is appropriate to consider a policy’s Social Engineering Fraud (SEF) coverage in interpreting the scope of the Computer Fraud coverage. The Facts Mississippi Silicon Holdings, LLC (“MSH”) is
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TOPICS
- Authorized Access/Entry Exclusion
- Authorized Representative Exclusion
- Bills of Exchange Act (Canada)
- Computer Fraud
- Counterfeit
- Direct Loss
- Employee Theft
- Forgery
- Funds Transfer Fraud
- Inventory Exclusion
- Manifest Intent
- Other Property
- Outside Investment Advisor Rider
- Ownership
- Prior Insurance
- Securities Broker Exclusion
- Securities Coverage
- Social Engineering Fraud
- Standing
- Subrogation
- Subsidiary
- Suit Limitation Provision
- Termination
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RECENT POSTS
- Cachet Financial Services: U.S. District Court finds No Coverage under Commercial Crime Policy for Alleged ACH Kiting and Related Frauds
- Sportsinsurance.com: Second Circuit applies Suit Limitation Period to Dismiss Action on Commercial Crime Policy
- Star Title Partners: Eleventh Circuit finds No Coverage for Social Engineering Fraud Loss under Cybercrime Endorsement to Cyber Protection Policy
- SJ Computers: U.S. District Court finds No Coverage for Business Email Compromise Loss under Computer Fraud Coverage
- RealPage: U.S. District Court finds Funds lost by Third Party Payments Processor do not meet Commercial Crime Policy’s Ownership Condition