FCL Fidelity Blog

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Chris McKibbin

About Chris McKibbin

As the only lawyer in Canada whose practice focuses primarily on fidelity insurance, Chris McKibbin has provided nearly 18 years of quality service and excellent results for virtually every fidelity insurer. He has been involved in most of the significant litigated fidelity coverage disputes in Canada since 2003, including complex coverage disputes involving fidelity policies, financial institution bonds and cyber policies arising from employee fraud, forgery of negotiable instruments, computer and funds transfer fraud and social engineering fraud. Chris also maintains a busy fraud recovery practice on behalf of both fidelity insurers and corporate clients.

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

Sanderina: U.S. District Court Finds No Coverage for Social Engineering Fraud Loss under Crime Policy

In the recent decision of Sanderina, LLC v. Great American Insurance Company, the U.S. District Court for the District of Nevada rejected an insured’s claim that a social engineering fraud loss arising from a “phony executive” email scam was covered under a commercial crime policy. Following leading U.S. authorities such as the Ninth Circuit’s Taylor & Lieberman decision (see our April 3, 2017 post), the Court found that none of the Forgery, Computer Fraud or Funds Transfer Fraud insuring agreements responded in respect of the email scam. The Facts In 2017, an unknown third party sent a series of emails

C.S. McCrossan Inc.: Eighth Circuit applies Crime Policy’s Authorized Representative Exclusion in finding No Coverage for loss caused by Insured’s Property Manager’s Employee

On August 6, 2019 the Eighth Circuit Court of Appeals released its decision in C.S. McCrossan Inc. v. Federal Insurance Company.  The decision addresses a host of coverage issues, including the application of the “Authorized Representative” exclusion and the definitions of “Subsidiary” and “Contractual Independent Contractor.”  The case is instructive for fidelity claims and underwriting professionals, as well as brokers and corporate risk managers.   The Facts C.S. McCrossan Inc. (“McCrossan”) maintained a subsidiary, Blakeley Properties, LLC (“Blakeley”).  One of McCrossan’s owners also owned a separate company, Stewart Properties, LLC (“Stewart”).   Blakeley and Stewart owned commercial rental properties.  Through intermediate

Starr: New York Supreme Court applies Termination condition in finding No Coverage under Fidelity Bond for Loss caused to Insurer by Managing General Agent

In the recent decision of Starr Insurance Holdings, Inc. v. United States Specialty Insurance Company, the Supreme Court of the State of New York held that the termination condition applied to terminate coverage in respect of losses allegedly caused to an insured insurance company (itself a holder of a fidelity bond issued by two other carriers) by the insured’s managing general agent (“MGA”)/broker.  Finding that the insured knew of the MGA’s dishonest acts prior to obtaining fidelity coverage, the Court applied the bond’s termination condition to hold that coverage terminated in respect of the MGA as of the inception of

Posco Daewoo: U.S. District Court applies Ownership Condition in rejecting Creditor’s “Reverse” Social Engineering Fraud Claim under its own Crime Policy

On November 19, 2018, the U.S. District Court for the District of New Jersey released its decision in Posco Daewoo America Corp. v. Allnex USA, Inc. and Travelers Casualty and Surety Company of America.  The decision represents a “sequel” to the Court’s 2017 decision arising out of the same claim (see our November 6, 2017 post).  The case features an interesting twist on the usual social engineering fraud claim scenario, in that it was the intended payee of the funds, not the payor, which asserted a claim under its own crime policy for recovery of funds which the payor had