A federal court recently found that a policyholder adequately plead that a loss of hundreds of thousands of dollars through wire fraud is covered under a commercial crime policy. In Landings, Yacht, Golf, and Tennis Club v. Travelers Casualty and Surety Company of America Case No. 2:22-cv-00459 , Landings Yacht, Golf, and Tennis Club (“Landings”) sued Travelers Casualty and Surety Company of America (“Travelers”) under a crime policy for denying coverage for: (1) about $6,885.79 in unauthorized withdrawals (“First Withdrawal”) from users purporting to be Landings and (2) $575,723.95 in withdrawals made by a third-party purporting to act on behalf of Landings (“Second Withdrawal”).
Continue Reading Covered Members Only: Federal Court Accepts Yacht Club’s Wire Fraud Allegations

Last week, Kim Kardashian settled with the SEC after the SEC announced charges against the social-media and reality TV star for promoting a crypto-currency token called EthereumMax, on her Instagram account, where she boasts more than 330 million followers, without disclosing that she received payment for the promotion. Kardashian agreed to pay $1.26 million in penalties, including the $250,000 EthereumMax paid her for promoting its crypto-tokens to potential investors. SEC Chair Gary Gensler stated that Kardashian’s case is “a reminder to celebrities and others that the law requires them to disclose to the public when and how much they are paid to promote investing in securities.”
Continue Reading Kardashian Coverage Conundrums

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

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

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.

Continue Reading Court Rejects Insurer’s Attempt to Dismiss Hotel’s $1.9 Million Crime Losses

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.

Continue Reading Insurance Carriers Tell Circuit Courts To Reconsider Holdings For Coverage In Cybercrime Suits

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.

Continue Reading Second Major Policyholder Win For Social Engineering Schemes