In a recent brief filed in the Sixth Circuit, American Tooling Center, Inc. argued that the appellate court should reverse the district court’s decision finding no insurance coverage for $800,000 that American Tooling lost after a fraudster’s email tricked an employee into wiring that amount to the fraudster. As we previously reported here, the district court found the insurance policy did not apply because it concluded that American Tooling did not suffer a “direct loss” that was “directly caused by computer fraud,” as required for coverage under the policy. The district count pointed to “intervening events” like the verification of production milestones, authorization of the transfers, and initiating the transfers without verifying the bank account information and found that those events precluded a “finding of ‘direct’ loss ‘directly caused’ by the use of any computer.”
Continue Reading Policyholder Urges 6th Circuit To Reverse Decision Finding No Coverage For Computer Fraud

Highlighting the continued problems faced by policyholders in obtaining coverage for “computer fraud,” a Michigan district court recently held that a manufacturer could not recover $800,000 in funds lost after an employee mistakenly wired payment for legitimate vendor invoices into a fraudster’s bank account after receiving a spoofed e-mail requesting payment. In American Tooling Center, Inc. v. Travelers Casualty and Surety Company of America, No. 16-12108 (E.D. Mich. Aug. 1, 2017), the district court applied state law favoring a narrow interpretation of the crime policy’s computer fraud provision to hold that the policyholder had not suffered a “direct” loss that was “directly caused” by the use of any computer.
Continue Reading District Court Holds Narrow Computer Fraud Provision, Restrictive State Law, Means No “Direct Loss” Arising From Fraudulent E-mail Scheme

On November 4, Michael Levine and Matthew McLellan provided commentary for Westlaw about the Fifth Circuit’s recent decision in Apache Corp. v. Great American Insurance Co., No. 15-20499, 2016 WL 6090901 (5th Cir. Oct. 18, 2016), on which Michael Levine had previously written a blog post. In the Westlaw Journal: Computer and Internet,

In a seemingly illogical decision, the Fifth Circuit Court of Appeals ruled in Apache Corp. v. Great American Ins. Co., No 15-20499 (5th Cir. Oct. 18, 2016), that loss resulting from a fraudulent e-mail did not trigger coverage under a crime policy’s “computer fraud” coverage because the loss was not the “direct result” of computer use.
Continue Reading Fifth Circuit Says “Computer Fraud” Requires More Than “Incidental” Use Of A Computer