With the amount of trickery going into thefts and embezzlements these days, crime insurance companies too often use the many steps involved in a fraudulent scheme to argue that losses are indirect and otherwise uncovered.
The recent decisions of the Second Circuit and Sixth Circuit on the “direct loss” argument and the scope of computer fraud coverage are important victories for policyholders generally, making clear that where the predominant step in the chain is some type of covered fraudulent misconduct involving a computer, a court is not going to entertain a direct loss defense to excuse the insurance company from paying.
As such, policyholders should be familiar with their crime coverage and promptly notify all potentially implicated lines of insurance coverage when a cybercriminal is afoot. — Joshua Gold, Anderson Kill
Joshua Gold is Chair of Anderson Kill’s Cyber Insurance Recovery Practice and was amicus counsel for United Policyholders in the Medidata Solutions, Inc. v. Federal Insurance Company case before the Second Circuit.