Data Fraud

Five Coverage Tips from Recent E-mail Scam Insurance Decisions

The number of decisions considering claims for insurance coverage resulting from Business Email Compromise (“BEC”) scams has been increasing, providing policyholders with some hope, and some clarity, in this muddy area.  (Here and here).

Policyholders got a recent win when a federal court in New York found in Medidata Solutions, Inc. that a data-services provider’s commercial crime policy covered an almost $5 million loss suffered as a result of a BEC scam.  The Court in Medidata found coverage under the insured’s computer fraud and funds transfer rider, reasoning that “fraudulent access to a computer system” extends to email spoofing.  Parting company with the Fifth Circuit in Apache , the Court in Medidata recognized that such spoofing can be a legal cause of the insured’s loss.  And even though an authorized employee willingly initiated the transfer, the funds were not transferred with Medidata’s “knowledge or consent.”

Despite recent wins, there remains enough uncertainty in the coverage landscape (here and here) that we suspect insurers will continue their full-on fight against coverage for these losses.  To help policyholders prepare for battle, here are five things you can do NOW to maximize insurance coverage for losses from a BEC scam. READ MORE