Recently I became aware of a court case between Aqua Star Corp and Travelers Casualty and Surety Company of America or, most commonly known as, Travelers.
This court case is dated back to 2013 when an employee was manipulated into wiring $700,000 to an unknown user. Due to it being an employee and intentional act, the claim into the Crime Policy was DECLINED!!!
No customer wants their claim declined due to an exclusion that was not very well known at the time. The exclusion is written out below:
On July 8, 2016, the U.S. District Court for the Western District of Washington released its decision in Aqua Star (USA) Corp. v. Travelers Casualty and Surety Company of America. The decision offers guidance to fidelity insurers with respect to the application of the “authorized entry” exclusion found in the base wording of many commercial crime policies (sometimes referred to as the “authorized access” exclusion), and illustrates how this exclusion may operate in the context of a social engineering fraud loss.
One source for accurate information about this case is:
https://www.lexology.com/library/detail.aspx?g=f37c7efa-fb3c-4606-ba83-746f72397eb9
It is extremely important for agents and insured’s to review crime and other related cyber policies to include Social Engineering Liability and Cyber Deception.
The formal Definition of Cyber Deception as written in one insurance policy by BCS Insurance Company is:
The good faith transfer by you of your organizations funds or the transfer of your goods in lieu of payment, to a third party as a direct result of cyber deception whereby you were directed to transfer goods or pay funds to a third party under false pretenses…..
I am writing this, so that if you are thinking of, or already have a cyber liability policy and a crime policy, you want to make sure that this coverage is part of your policy. Not only is this a huge gap in coverage, but also a tremendous risk to all business owners.
if you have any questions, please feel free to reach out to us to learn more about cyber liability and crime bonds. We are more than happy to help.
