Insurance Coverage for “Phishing” Losses—Make Sure Your “Net” Is Adequate before You Get Caught
Lawyers and their clients alike have all heard about, and some are painfully familiar with, horror stories regarding losses resulting from so-called “phishing” or “social engineering” schemes. Broadly described, these schemes involve criminals using fraudulent emails, phone calls, copycat websites, or other deceptive communications to trick unwitting companies into sharing valuable personal or financial information, or into wiring money to sham bank accounts. The scammers lure their targets into a false sense of security by spoofing trusted company logos or legitimate employee email addresses.
As these schemes become more common, clients may derive some comfort from having purchased both “cyber” and “computer fraud” coverage, believing that such policies most certainly protect and cover for such losses. Unfortunately, this comfort is often misplaced. While assuming that coverage exists for such “electronic” losses may seem reasonable, when it comes to providing coverage under “off-the-shelf” cyber and computer fraud policies, insurance companies do not always see it that way, as shown by the emerging case law. Recent cases demonstrate that policyholders should carefully review their cyber and crime policies, and where needed, seek to negotiate more expansive, and express, coverage if possible. Insurance practitioners should also keep their eyes on key appellate decisions anticipated in 2018, including Medidata Solutions Inc. v. Federal Insurance Co., in the U.S. Court of Appeals for the Second Circuit, and American Tooling Center v. Travelers Casualty & Surety Co., in the U.S. Court of Appeals for the Sixth Circuit, which both involve computer fraud coverage under crime policies.
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“Insurance Coverage for 'Phishing' Losses—Make Sure Your 'Net' Is Adequate before You Get Caught,” by Lisa M. Campisi was first presented at the 26th Annual Insurance Coverage Litigation Committee Mid-Year Meeting in February 2018, where Lisa spoke on the Emerging Trends and New Challenges in the D&O and Professional Liability Worlds panel. It is reprinted here with permission of the American Bar Association Tort Trial and Insurance Practice Section.