FCL Fidelity Blog
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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
Aqua Star: U.S. District Court applies “Authorized Entry” Exclusion to claim under Computer Fraud Coverage
On July 8, 2016, the U.S. District Court for the Western District of Washington released its decision in Aqua Star (USA) Corp. v. Travelers Casualty and Surety Company of America. The decision offers guidance to fidelity insurers with respect to the application of the “authorized entry” exclusion found in the base wording of many commercial crime policies (sometimes referred to as the “authorized access” exclusion), and illustrates how this exclusion may operate in the context of a social engineering fraud loss. The Facts The insured, Aqua Star (USA) Corp. (“Aqua Star”), is a seafood importer that had a pre-existing relationship with a
Telamon: U.S. District Court finds Insured’s Vice-President to be Independent Contractor falling outside Crime Policy’s Employee Theft Coverage
In Telamon Corp. v. Charter Oak Fire Ins. Co., the U.S. District Court for the Southern District of Indiana held that a Vice-President of Major Accounts who provided management and marketing services to a telecommunications company was not an “Employee” within the meaning of the employee theft coverage afforded by its Travelers Wrap+ policy, but rather an independent contractor. The Facts The insured, Telamon Corporation (“Telamon”), is a telecommunications company headquartered in Indiana. Telamon installed telecommunications equipment for customers such as AT&T. The alleged defaulter, Juanita Berry, operated a one-person telecommunications consulting company, J. Starr Communications, Inc. (“J. Starr”). Pursuant
Western Alliance Bank: U.S. District Court dismisses Creditor Bank’s Claim under Debtor’s Commercial Crime Policy
On February 18, 2016, the U.S. District Court for the Northern District of California released its decision in Western Alliance Bank v. National Union Fire Insurance Company of Pittsburgh, Pa. The Court dismissed a creditor bank’s direct action against a fidelity insurer for indemnity in respect of alleged thefts by the debtor insured’s employees of assets over which the bank held a security interest. The decision reinforces the first-party nature of commercial crime coverage and is consistent with other recent U.S. and Canadian case law on “third party direct actions” against fidelity insurers. The Facts Sorrento Networks GmbH (“Sorrento”) carried
EMCOR Group: Fourth Circuit applies Prior Insurance Provision to Restrict Coverage under Commercial Crime Policy
In EMCOR Group, Inc. v. Great American Insurance Company, the Fourth Circuit Court of Appeals applied a prior insurance provision in a Commercial Crime Policy to restrict coverage to only the immediate prior year that the insured maintained fidelity coverage, rather than the previous five years, as asserted by the insured. The decision highlights the importance of properly analyzing and applying prior insurance provisions in loss-sustained forms in multi-year loss scenarios. The Facts EMCOR is a construction and building maintenance company. In 2005, it reported a $10 million employee dishonesty loss to Great American in respect of allegedly fraudulent acts
St. Paul Croatian: U.S. District Court applies Termination Provision to Claim on Credit Union’s Fidelity Bond
On January 14, 2016, the U.S. District Court for the Northern District of Ohio released its decision in National Credit Union Administration Board v. CUMIS Insurance Society, Inc., following a trial that focused on the issue of the application of the termination provision in a fidelity bond issued to a credit union. The Court held that, based on facts known to the president of the credit union’s Board of Directors, the provision applied to terminate coverage. The decision is significant in that knowledge of the manager’s dishonesty was effectively imputed to the president, even though the president was not aware
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TOPICS
- Authorized Access/Entry Exclusion
- Authorized Representative Exclusion
- Bills of Exchange Act (Canada)
- Computer Fraud
- Counterfeit
- Direct Loss
- Employee Theft
- False Pretences Exclusion
- 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
- Voluntary Parting Exclusion
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RECENT POSTS
- Brooks & Derensis: U.S. District Court finds No Coverage for Cheque Fraud Loss under Forgery Insuring Agreements
- Westlake Chemical: Texas Court of Appeals applies Authorized Representative Exclusion in finding No Coverage under Crime Policy for Phony Invoicing Scheme
- 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