In the recent decision of CP Food & Beverage, Inc. v. United States Fire Insurance Company, the U.S. District Court for the District of Nevada held that coverage was not available under a crime policy where the insured’s employees had defrauded the insured’s customers through misuse of customer credit cards. The decision makes important findings regarding the appropriate test for “direct loss” causation in a crime policy, and reaffirms the general principle that crime policies are not intended to indemnify insureds for their vicarious liability arising from employees’ theft of third parties’ property.
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Direct Loss
American Tooling Center: U.S. District Court finds no Coverage for Social Engineering Fraud Loss under Crime Policy’s Computer Fraud Insuring Agreement
By David S. Wilson, Chris McKibbin & Stuart Woody on
JUMP TO: THE FACTS | THE COMPUTER FRAUD COVERAGE | THE CONCLUSION
On August 1, 2017, the U.S. District Court for the Eastern District of Michigan released its decision in American Tooling Center, Inc. v. Travelers Casualty and Surety Company of America. The Court held that a vendor impersonation fraud loss did not fall within the terms of a crime policy’s computer fraud coverage. In coming to this conclusion, the Court found there was no direct causal link between the receipt of fraudulent emails by an insured requesting payment to the fraudster’s bank account, and the insured’s authorized transfer of funds to that bank account.
Taylor & Lieberman: Ninth Circuit finds No Coverage under Crime Policy for Client Funds lost in Social Engineering Fraud
By David S. Wilson & Chris McKibbin on
In the recent decision of Taylor & Lieberman v. Federal Insurance Company, the Ninth Circuit Court of Appeals affirmed a decision of the U.S. District Court for the Central District of California holding that a business management firm did not have coverage in respect of client funds which it was fraudulently induced to wire…
InComm: U.S. District Court holds that Computer Fraud Coverage does not respond in Prepaid Debit Card Scheme
By David S. Wilson & Chris McKibbin on
Guest Co-Author: John Tomaine
On March 16, 2017, the U.S. District Court for the Northern District of Georgia released its decision in InComm Holdings, Inc. v. Great American Insurance Company. The Court held that Great American’s computer fraud coverage did not respond where holders of prepaid debit cards used multiple simultaneous telephone calls to…
Hantz Financial Services: U.S. District Court applies “Direct Means Direct” Approach in Finding No Coverage for Third-Party Losses under Financial Institution Bond
By David S. Wilson & Chris McKibbin on
In Hantz Financial Services, Inc. v. National Union Fire Insurance Company of Pittsburgh, PA., the U.S. District Court for the Eastern District of Michigan held that a Financial Institution Bond did not provide coverage to a financial services firm in respect of frauds perpetrated by an employee upon the firm’s clients. The decision is…
Taylor & Lieberman: U.S. District Court applies “Direct means Direct” Causation Requirement in finding No Coverage for Client Funds lost in Wire Transfer Fraud
By David S. Wilson & Chris McKibbin on
In Taylor & Lieberman v. Federal Insurance Company, the U.S. District Court for the Central District of California applied the “direct means direct” approach to causation in holding that a business management firm did not have coverage in respect of client funds which it was fraudulently induced to wire overseas.
The Facts
Taylor &…