FCL Fidelity Blog

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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

The Brick: Alberta Court of Queen’s Bench finds no Coverage for Social Engineering Fraud Loss under Crime Policy’s Funds Transfer Fraud Insuring Agreement

JUMP TO: THE FACTS | THE FUNDS TRANSFER FRAUD COVERAGE | THE CONCLUSION On July 4, 2017, the Alberta Court of Queen’s Bench released its decision in The Brick Warehouse LP v. Chubb Insurance Company of Canada. The Court found that a vendor impersonation loss did not fall within the terms of a crime policy’s Funds Transfer Fraud coverage. The case represents the first social engineering fraud decision in Canada since the widespread introduction of discrete social engineering fraud coverage, and confirms the principles adopted in several recent American social engineering fraud decisions, including the Ninth Circuit’s decision in Taylor & Lieberman (see our April

Taylor & Lieberman: Ninth Circuit finds No Coverage under Crime Policy for Client Funds lost in Social Engineering Fraud

In the recent decision of Taylor & Lieberman v. Federal Insurance Company, the Ninth Circuit Court of Appeals affirmed a decision of the U.S. District Court for the Central District of California holding that a business management firm did not have coverage in respect of client funds which it was fraudulently induced to wire overseas. While the District Court had held that the insured had failed to establish that it had sustained any “direct” loss at all (see our July 14, 2015 post), the Ninth Circuit affirmed the result on other grounds, holding that the insured had also failed to

Pestmaster: Ninth Circuit affirms Fidelity Insurer’s Intent on Scope of Computer Fraud and Funds Transfer Fraud Coverages

In our January 6, 2015 post, we analyzed the decision of the U.S. District Court for the Central District of California in Pestmaster Services, Inc. v. Travelers Casualty and Surety Company of America and its implications for the interpretation of the Computer Fraud and Funds Transfer Fraud coverages.  On July 29, 2016, the Ninth Circuit Court of Appeals released a brief opinion affirming the District Court’s interpretations of these coverages. The Facts Pestmaster, a pest control business, was insured under a Travelers Wrap+ policy.  In 2009, Pestmaster hired a payroll company, Priority 1, to handle its payroll and payroll tax

First National Bank of Northern California: Ninth Circuit analyzes scope of “Customer” under Financial Institution Bond’s Telefacsimile and Voice Instruction Transactions Coverage

In First National Bank of Northern California v. St. Paul Mercury Insurance Company, the Ninth Circuit Court of Appeals analyzed certain requirements for Telefacsimile and Voice Instruction Transactions coverage under a Financial Institution Bond issued by St. Paul (now Travelers) to First National Bank of Northern California (the “Bank”). The decision highlights the importance of clearly establishing the exact contractual arrangement between the insured financial institution and its customer in analyzing these types of transfer coverages. The Facts The Bank’s customers, Brent and Paula Edwards, were trustees for the Edwards Living Trust. Mr. and Ms. Edwards opened an account (the

Pestmaster: U.S. District Court affirms Fidelity Insurer’s Intent on Scope of Computer Fraud and Funds Transfer Fraud Coverages

In Pestmaster Services, Inc. v. Travelers Casualty and Surety Company of America, the U.S. District Court for the Central District of California granted partial summary judgment in favour of Travelers on a claim advanced under its Computer Fraud and Funds Transfer Fraud coverages.  The decision provides valuable guidance regarding the scope of these coverages. The Facts Pestmaster, a pest control business, was insured under a Travelers Wrap+ policy.  In 2009, Pestmaster hired a payroll company, Priority, to handle its payroll and payroll tax obligations.  Pestmaster executed an ACH authorization which authorized Priority to obtain payment of Priority’s approved invoices by