As businesses continue to increase their reliance on technology, they are bound to face the inevitable risks associated with online transactions and other cyber exposures. This, in turn, emphasizes the importance of having the proper insurance policies and compliance methods in place to prevent or, at least, mitigate losses that ensue from these risks. In this context, many insurance policies require that there be a “direct” loss for there to be coverage, which has spawned numerous lawsuits about what the word “direct” means. The latest court to weigh in has sided with the insured and interpreted that term broadly to essentially mean proximate causation.
Continue Reading Court Does Not Beat Around The Bush and Is Rather Direct In Rejecting Insurer’s Causation Argument In Computer Fraud Claim
Crime Insurance
A Win for Policyholders Who Are Victims of Fraudulent Bank Transfer Schemes
Recently, the Ninth Circuit dealt with a case involving a scenario that is becoming all too common. In Ernst & Haas Mgmt. Co., Inc. v. Hiscox, Inc., 23 F.4th 1195 (9th Cir. 2022), a property management company’s accounts payable clerk received several e-mails from her supervisor instructing her to pay some invoices. Unbeknownst to the clerk, these e-mails did not originate with her supervisor, but were actually part of a fraudulent scheme to elicit fraudulent bank transfers. The clerk paid off hundreds of thousands of dollars in “invoices” before becoming suspicious but, by then, it was too late and the damage was done.
Continue Reading A Win for Policyholders Who Are Victims of Fraudulent Bank Transfer Schemes
Court Rejects Insurer’s Attempt to Dismiss Hotel’s $1.9 Million Crime Losses
A hotel operator defeated an insurer’s motion to dismiss its suit alleging that the insurer wrongfully denied coverage and acted in bad faith by denying the hotel’s $1.9 million claim arising from an employee’s fraudulent scheme diverting commissions to fictitious travel agencies. The court held that the hotel operator had suffered an “insurable loss” and rejected the insurer’s argument that the claim was barred under the policy’s suit limitations provision.
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Continue Reading Court Rejects Insurer’s Attempt to Dismiss Hotel’s $1.9 Million Crime Losses
Insurer on the Hook for Loss Resulting From Phishing Scheme
On December 9th, the Eleventh Circuit held that a loss of over $1.7 million to scammers was covered under a commercial crime insurance policy’s fraudulent instruction provision.
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Continue Reading Insurer on the Hook for Loss Resulting From Phishing Scheme
Bad Faith Insurance Quote Defeats Summary Judgment
On Friday, August 9th, an Indiana Court of Appeals reversed a trial court’s ruling and allowed an insureds’ claim for bad faith based on misrepresentations in the insurer’s quote for coverage to proceed to trial.
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Continue Reading Bad Faith Insurance Quote Defeats Summary Judgment
Insurance Carriers Tell Circuit Courts To Reconsider Holdings For Coverage In Cybercrime Suits
In a recent post, we discussed the Sixth Circuit’s holding in American Tooling Center, Inc. v. Travelers Casualty and Surety Co. of America, No. 17-2014, 2018 WL 3404708 (6th Cir. July 13, 2018), where the Sixth Circuit reversed the district court’s summary judgment for the insurer, finding coverage under its policy for a fraudulent scheme that resulted in a $834,000.00 loss. The insurer, Travelers, has now asked the Court to reconsider its decision.
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Continue Reading Insurance Carriers Tell Circuit Courts To Reconsider Holdings For Coverage In Cybercrime Suits
Second Major Policyholder Win For Social Engineering Schemes
The Sixth Circuit, in American Tooling Center, Inc. v. Travelers Casualty and Surety Co. of America, No. 17-2014, 2018 WL 3404708 (6th Cir. July 13, 2018), reversed the District Court’s grant of summary judgment in favor of the insurer in a dispute over coverage for a social engineering scheme. The policyholder, American Tooling, lost $800,000 after a fraudster’s email tricked an American Tooling employee into wiring that amount to the fraudster.
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Continue Reading Second Major Policyholder Win For Social Engineering Schemes
Coverage for Social Engineering Scams; Still Evolving
To follow up on our post last week recapping a recent Ninth Circuit decision regarding coverage for losses from a social engineering scheme, federal appellate courts continue to examine the coverage available for such losses. As Law360 highlighted, and as we previously reported (here, here, here, and here), appeals…
Florida Federal Court Reinforces Principle That Precise Policy Language Is Required Before An Insurer Can Deny Coverage Based On An Exclusion
A recent ruling by U.S. District Judge Paul Byron of the Middle District of Florida has made clear that the actual words used in an insurance contract matter. The court, in Mt. Hawley Insurance Co. v. Tactic Security Enforcement, Inc., No. 6:16-cv-01425 (M.D. FL. 2018), denied an insurance company’s motion for summary judgment attempting to rely on an exclusion to deny coverage to its policyholder. The policyholder, Que Rico La Casa Del Mofongo, operated a restaurant establishment in Orlando, Florida, and sought coverage for two negligence lawsuits filed against it for allegedly failing to prevent a shooting and another violent incident on its premises.
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Continue Reading Florida Federal Court Reinforces Principle That Precise Policy Language Is Required Before An Insurer Can Deny Coverage Based On An Exclusion
Initial Coin Offerings and Insurance
This week, SEC Chairman Jay Clayton issued a statement on Initial Coin Offerings (ICO) addressing the legality, fairness, and risks associated with those offerings. Although the agency’s bulletin was one of many recent public statements by federal agencies on ICOs and cryptocurrencies generally, this new warning highlights additional issues and concerns with the ICO phenomenon that are particularly relevant to insurance coverage.
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Continue Reading Initial Coin Offerings and Insurance