Litigation Trends in Cyber Coverage for Wire Fraud

Cindy Jordano, left, and Adam Ziffer, right, with Cohen Ziffer Frenchman & McKenna. Courtesy photos.

Companies increasingly face the rampant threat of wire fraud. Wire fraud typically occurs where cyber criminals pose as legitimate persons of authority, such as a high-ranking company executive, a vendor, or a customer, and trick the business into wiring money to the fraudster’s bank accounts. Businesses targeted by such attacks often turn to their insurance companies to recover their resulting losses.

Previously, courts across the country overwhelmingly found that such attacks were covered under “Computer Fraud” provisions, which commonly appear in crime and cyber policies, such as those in Principle Solutions Group LLC v. Ironshore Indemnity, Inc., 944 F.3d 886 (11th Cir. 2019; Medidata Solutions Inc. v. Federal Insurance Co., 729 Fed. App’x 117 (2d Cir. 2018); and American Tooling Center, Inc. v. Travelers Casualty & Surety Co. of American, 895 F.3d 455 (6th Cir. 2018). In finding coverage for wire fraud, these Circuit Court decisions rejected the argument frequently made by insurers that the actions of an insured’s employees, deceived by the fraudster into making a transfer, break the causal chain between the fraudster’s use of a computer and the insured’s losses.