No Coverage For Fraudulent Withdrawal Of Electronic Funds

Court finds all-risk insurance policy with cyber risk exclusions does not cover hacker’s fraudulent withdrawals from insured’s bank account.

December 04, 2013

Law360, New York (December 04, 2013, 11:39 PM ET) ‐‐ On Nov. 21, 2013, District Court Judge Orinda Evans ruled that an all-risk insurance policy did not provide coverage to a real estate brokerage company for online fraudulent withdrawals from the company’s bank account. Metro Brokers Inc. v. Transportation Insurance Co., No. 1:12-CV-3010-ODE (N.D. Ga. Nov. 21, 2013).[1] The evidence suggested that a hacker obtained Metro’s online banking log-in credentials through a key logger "Zeus" virus that was found on several of Metro’s computers. The court gave effect to two exclusions concerning cyber risks and recognized that specialty coverage is available to policyholders. The court’s decision is an important one for insurers who exclude or provide first-party or liability cyber coverage and for policyholders who may make a claim for cyber losses.

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James A. Kitces


Managing Partner, Boston Office

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