An Alabama federal district court has ruled that a third-party claim seeking indemnification for a medical malpractice suit, allegedly resulting from the insured’s allegedly faulty performance of technology services, was barred from coverage by “medical services” and bodily injury exclusions. Jackson, Key & Assocs., LLC v. Beazley Ins. Co., Inc., 2018 WL 6710041 (S.D. Ala.… Continue Reading
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Monetary Loss from Fraudulent Email Scheme Triggers Coverage Under Business Owners’ Policy
Posted in Cyber Policies and IssuesA Montana federal district court has ruled that a false pretense exclusion did not preclude coverage under a crime policy for monetary losses resulting from a fraudulent email scheme, reasoning that the exclusion was ambiguous. Ad Advert. Design, Inc. v. Sentinel Ins. Co., 2018 WL 4621744 (D. Mont. Sept. 26, 2018). The court also held… Continue Reading
No Personal Injury Coverage for Payment Card Breach Because Damages Resulted from Hacker’s Criminal Conduct, Not Insured’s Data Security Practices
Posted in Cyber Policies and Issues, Professional ServicesA Florida federal district court has ruled that a claim asserting that an insured’s negligent data security practices led to a payment card breach did not trigger personal injury coverage under a CGL policy. See St. Paul Fire & Marine Ins. Co. v. Rosen Millennium, Inc., No. 6:17-cv-540-Orl-41GJK (M.D. Fla. Sept. 28, 2018). The court… Continue Reading
Court Rules that “Direct Means Direct” in Crime Policy, Rejecting Proximate Cause Analysis
Posted in Cyber Policies and IssuesA Nevada federal district court has applied the “direct means direct” rule to conclude that losses an insured suffered from payment card chargebacks when certain employees made fraudulent charges on customers’ payment cards were only the “indirect” result of employee theft, and therefore not covered under the insured’s commercial crime policy. CP Food & Beverage,… Continue Reading
Sixth Circuit Finds Insurer Obligated to Cover Loss from Fraudulent Email Scheme
Posted in Cyber Policies and IssuesThe U.S. Court of Appeals for the Sixth Circuit, applying Michigan law, has held that the computer fraud provision of a commercial crime policy covers losses from wire transfers sent by the insured pursuant to fraudulent emails. American Tooling Ctr., Inc. v. Travelers Cas. & Sur. Co., 2018 WL 3404708 (6th Cir. Jul. 13, 2018).… Continue Reading
Appeals Court Holds that Computer Fraud Policy Covers Spoofing Attack
Posted in Cyber Policies and IssuesThe U.S. Court of Appeals for the Second Circuit, applying New York law, has held that an email spoofing attack was covered under a computer fraud policy because the attack involved manipulating the insureds’ email system. Medidata Solutions Inc. v. Federal Ins. Co., No. 17-2492-cv (2d Cir. July 6, 2018)… Continue Reading
Contract Exclusion Does Not Bar Defense Obligation for Alleged Payment Card Breach
Posted in Breach of Contract – coverage for amounts due pursuant to contract, exclusions, Cyber Policies and IssuesThe United States Court of Appeals for the Fifth Circuit, applying Texas law, has reversed an order granting an insurer judgment on the pleadings, holding that a breach of contract exclusion did not bar coverage for a demand received by an insured retailer from its credit card processor for indemnification and other relief arising from… Continue Reading
Fraudulent Voucher Redemption Scheme Perpetrated by Phone Involves “Use of Computer” but Does Not “Directly Result” in Covered Loss
Posted in Cyber Policies and IssuesThe United States Court of Appeals for the Eleventh Circuit, applying Georgia law, has affirmed a district court’s ruling that a fraudulent scheme using telephones to exploit a computer coding vulnerability in the insured’s system that ultimately led to a loss was not covered under a computer fraud provision in a commercial crime policy. Interactive… Continue Reading
Two Exclusions Bar Coverage under Cyber Policy for TCPA Claim
Posted in Cyber Policies and IssuesA New York federal district court has ruled that two exclusions in a cyber risk policy barred coverage for a claim alleging violations of the Telephone Consumer Protection Act (TCPA). Flores v. ACE American Ins. Co., No. 17-cv-8674 (S.D.N.Y. Apr. 30, 2018). Among other rulings, the court held that the TCPA was not a “Privacy Regulation”… Continue Reading
Exclusion Bars Coverage for Fraudulent Instruction Loss when Employee with Authority to Initiate Wire Transfer Enters Fraudulent Account Information
Posted in Cyber Policies and IssuesThe U.S. Court of Appeals for the Ninth Circuit has held that an exclusion for loss “resulting directly or indirectly from the input of Electronic Data by a natural person having the authority to enter the Insured’s Computer System” barred coverage under a Computer Fraud insuring clause for a business email compromise/fraudulent instruction scheme. Aqua… Continue Reading
Claim based on Failed IT Transition Does Not Involve Property Damage or Loss of Use
Posted in Cyber Policies and IssuesA Colorado federal district court, applying Colorado law, has held that a claim against an information technology consulting firm arising from the firm’s alleged mismanagement of a project to replace its client’s systems did not involve “property damage” (including “loss of use”) under a CGL policy. Ciber, Inc. v. Federal Ins. Co., No. 16-cv-01957-PAB-MEH (D.… Continue Reading
No Coverage for “Data Breach” Claim under CGL Policy
Posted in Cyber Policies and IssuesA Florida federal district court, applying South Carolina law, has held that a claim arising out of a data breach alleging that an insured failed to safeguard personal information did not trigger personal and advertising injury coverage under a commercial general liability policy. Innovak Int’l, Inc. v. The Hanover Ins. Co., No. 8:16-cv-2453-MSS-JSS (M.D. Fla.… Continue Reading
No Crime Coverage for Amounts Wired by Insured’s Customer to Fraudster Posing as Insured
Posted in Cyber Policies and IssuesA New Jersey federal district court has held that a commercial crime policy does not afford coverage for a loss caused by a fraudulent wire instruction scheme where an imposter, posing as the insured, directed the insured’s customer to pay receivables to the impostor’s account. Posco Daewoo America Corp. v. Allnex USA, Inc., No. 52:17-cv-00483-JMV-MF… Continue Reading
Fraudulent Instruction Loss Caused by Social Engineering Scheme Does Not Trigger Computer Fraud Coverage Under Commercial Crime Policy
Posted in Cyber Policies and IssuesA Michigan federal district court has held that a fraudulent instruction loss caused by a social engineering scheme did not constitute a “direct loss” that was “directly caused by computer fraud” and therefore did not trigger computer fraud coverage under a commercial crime policy. American Tooling Ctr., Inc. v. Travelers Cas. & Sur. Co. of… Continue Reading
Computer Fraud Coverage Extends to Manipulation of External Email Server
Posted in Cyber Policies and IssuesThe United States District Court for the Southern District of New York, applying New York law, has held that a cloud-based service provider’s loss resulting from fraudulent wire instructions is covered under a computer fraud and funds transfer fraud policy because the fraudulent email changed data in the provider’s computer system despite use of a… Continue Reading
Loss Caused by Fraudulent Exploitation of Coding Error Does Not Implicate Computer Fraud Coverage
Posted in Cyber Policies and IssuesA Georgia federal district court has held that a fraudulent scheme using telephones to exploit a computer coding vulnerability in the insured’s system that ultimately led to a loss was not covered under a computer fraud provision in a commercial crime policy. Incomm Holdings, Inc. v. Great Am. Ins. Co., 2017 WL 1021749 (N.D. Ga.… Continue Reading
No Crime Coverage for Social Engineering Fraud
Posted in Cyber Policies and IssuesThe United States Court of Appeals for the Ninth Circuit, applying California law, has held that a crime policy did not afford coverage for a loss caused by an insured’s initiation of wire transfers based on fraudulent email instructions. Taylor & Lieberman v. Federal Ins. Co., 2017 WL 929211 (9th Cir. Mar. 9, 2017) .… Continue Reading
Quality of Services Exclusion Bars Coverage for Online Auction Service’s Alleged Misrepresentations About Its Reliability
Posted in Cyber Policies and IssuesIn another win for an insurer represented by Wiley Rein, the United States District Court for the Middle District of Florida, applying New Jersey and Florida law, has held that the quality of services exclusion in a technology errors and omissions policy barred coverage for a claim that the insured negligently misrepresented the safety and… Continue Reading
Computer Fraud Provision of Crime Policy Does Not Cover Loss from Business Email Compromise and Social Engineering Scheme
Posted in Cyber Policies and IssuesApplying Texas law, the United States Court of Appeals for the Fifth Circuit has held that a business email compromise loss involving social engineering did not “result[] directly from the use of any computer to fraudulently cause a transfer” and thus did not trigger Computer Fraud coverage under a commercial crime insurance policy. Apache Corp.… Continue Reading
Cyber Policy Does Not Cover Indemnification Payments to Credit Card Processor After Data Breach
Posted in Breach of Contract – coverage for amounts due pursuant to contract, exclusions, Cyber Policies and IssuesIn one of the first cases directly addressing the scope of coverage under a cyber insurance policy, an Arizona federal district court has dismissed an insured’s complaint seeking coverage for amounts paid to its credit card processor for assessments resulting from a data breach. P.F. Chang’s China Bistro, Inc. v. Fed. Ins. Co., No. 2:15-CV-01322-SMM… Continue Reading
Claim based on Unsolicited Text Messages in Violation of TCPA Does Not Allege a “Privacy Wrongful Act” under Policy’s “Cyber Claims Endorsement”
Posted in Cyber Policies and Issues, Wrongful ActAn Illinois intermediate appellate court has held that a cosmetic surgery center was not entitled to coverage because a claim alleging that it violated the Telephone Consumer Protection Act (TCPA) by sending unsolicited text messages advertising its services did not allege a “privacy wrongful act” under a “cyber claims endorsement” in a medical professional liability… Continue Reading
Knowing Conduct Is Not An “Error, Omission or Negligent Act” Under Technology E&O Policy
Posted in Cyber Policies and Issues, Wrongful ActA Utah federal district court has held there was no coverage under a technology E&O policy because an underlying complaint against two insureds alleged that they knowingly failed to provide certain customer information to the claimant, the insureds’ business customer, which did not qualify as an “error, omission or negligent act.” Travelers Prop. Cas. Co.… Continue Reading