Cybersecurity: Stolen $1.4 Million Not Covered Under Fraud Policy
05 June 2021
Arnold & Porter
To print this article, all you need is to be registered or login on Mondaq.com.
The US District Court for the Eastern District of
determined that a $1.4 million wire transfer fraud was not
covered under Ryeco, LLC, a fruit distributor’s, commercial
crime policy. Ryeco, LLC v. Selective Ins. Co., No.
2:20-cv-03182 (E.D. Pa. May 13, 2021). A hacker in South Africa had
gained access to Ryeco’s network, fraudulently applied the
company’s vice president’s signature to wire transfer
forms, and emailed these forms to Ryeco’s bank, causing the
funds to be transferred into a sham account.
Ryeco discovered the fraud, performed a forensic investigation,
and obtained a coverage denial from Selective Insurance Company.
Ryeco then sued Selective for coverage and breach of contract,
urging that it was covered for the loss under the “Forgery or
Alteration” crime policy it purchased from Selective. That
policy explicitly covered “loss resulting directly from
‘forgery’ or alteration of checks, drafts, promissory
notes, or similar written promises, orders or directions to pay a
sum certain in ‘money.'” Selective denied coverage
because the forged wire transfer forms did not trigger the
unambiguous terms of the policy, which covers “check, draft,
promissory note or similar written promise.” The court agreed,
differentiating the forged emails and forms from checks and written
promises. As such, it entered summary judgment for Selective.
Notably, it was undisputed that if Ryeco had purchased
“Funds Transfer Fraud” coverage, it would have been
reimbursed for its losses, a lesson worth taking in this atmosphere
of increasing cybersecurity, phishing and ransomware attacks.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
POPULAR ARTICLES ON: Technology from United States