Commercial Crime

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Jack Keilty

In the following guest post, Jack Keilty, Head of Management Liability, New Dawn Risk, examines the growing problem of social engineering fraud, and considers the problems losses from this type of fraud can present from an insurance standpoint. I would like to thank Jack for allowing me to publish his article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this site’s readers. Please contact me directly if you would like to submit a guest post. Here is Jack’s article.Continue Reading Guest Post: The Social Engineering Fraud-Shaped Hole in Insurance Cover

Earlier this week, I published a post noting the challenges policyholders can face in establishing coverage under traditional crime and cyber liability insurance policies for losses arising from “payment instruction fraud” (sometimes called “social engineering fraud). I also discussed the recent availability of sublimited coverage extensions for these kinds of losses. In response to my earlier post, several readers sent me messages noting that several courts have, in fact, found coverage under commercial crime policies for payment instruction fraud losses. As if to prove their point, the same day as I published my post, the 11th Circuit issued an opinion affirming a district court ruling that a firm’s payment instruction fraud losses are covered under the “fraudulent instruction” provisions of the applicable commercial crime policy.  The 11th Circuit’s December 9, 2019 opinion can be found here.
Continue Reading 11th Circuit: Crime Policy Covers Payment Instruction Fraud Loss

A recent coverage dispute involving a Nevada club’s losses resulting from its employees’ theft from the club’s customers’ credit cards raises interesting issues with implications for coverage questions for other kinds of losses for which policyholders are seeking crime policy coverage. In the recent Nevada club credit card fraud case, District of Nevada Judge Andrew Gordon held that the club’s crime policy did not cover the club’s losses from the employees’ theft of funds from the customers’ credit card accounts because the losses did not result directly from the employees’ theft. Judge Gordon’s August 6, 2018 opinion can be found here. An August 7, 2018 post on the Wiley Rein law firm’s Executive Summary Blog about Judge Gordon’s opinion can be found here.   
Continue Reading Crime Policy Doesn’t Cover Employee Credit Card Overcharge Losses

The insurer on the receiving end of the recent Sixth Circuit ruling that the a payment instruction fraud loss is covered under the Computer Fraud section of a Commercial Crime policy has filed a petition for rehearing or rehearing en banc. In its July 27, 2018 petition (here), the insurer contends that in its decision, the Sixth Circuit’s analysis was at odds with its own prior precedent, and as a result the appellate court applied the wrong causation analysis in determining whether or not the fraudulent email “directly” caused the loss of the policyholder, American Tooling Center (ATC).
Continue Reading Insurer Seeks Rehearing of Ruling That Payment Instruction Fraud is Covered

Along with all of the other risks arising from companies’ increasing dependence on electronics communications and data storage technology has come not only the risks of a data breach caused by a hacker, but also the risk of a company’s transfer of funds by one of its employees who has been duped into believing the transfer was legitimate and authorized. These kinds of losses, which have been called “payment instruction fraud” or “social engineering fraud,” raise of a host of potential issues under traditional insurance policies, owing to the voluntary nature of the funds transfer made by a person authorized to access the company’s computer system. A recent decision by the Ninth Circuit illustrates the kinds of coverage problems that can arise from these circumstances. The Ninth Circuit’s unpublished April 17, 2018 opinion in Aqua Star (USA) Corp. v. Travelers Casualty & Surety Company of America can be found here. The Wiley Rein’s law firm’s April 19, 2018 post about the Ninth Circuit decision can be found here.
Continue Reading Ninth Circuit: No Crime Policy Coverage for Social Engineering Fraud Losses

David Bergenfeld

In the following guest post, David Bergenfeld, a Senior Associate in D’Amato & Lynch’s Fidelity Bond Practice Group, takes a look at the key judicial decisions during the third quarter of 2016 interpreting cyber and commercial crime insurance policies. I would like to thank David for allowing me to publish his article. I welcome guest post submissions from responsible authors on topics of interest to this blog’s readers. Please contact me directly if you would like to submit a guest post. Here is David’s guest post.
Continue Reading Guest Post: Recent Trends in Interpreting Cyber and Commercial Crime Insurance