Crime Insurance for Social Engineering Thefts: The Ninth Circuit Finally Joins the Party
Corporate policyholders often assume their computer fraud crime insurance will cover so-called social engineering thefts. Reasonably so. Fraudsters commit these crimes by using computers to trick innocent employees into transferring corporate funds to what they believe are legitimate bank accounts, only to discover later that the accounts are controlled by criminals who have stolen the money. Although most people would consider this to be computer fraud, crime insurers have resisted covering such thefts. And some courts have sided with the insurers. Until recently, insurers could point to the Ninth Circuit Court of Appeals as being one of those courts. On January 26, the Ninth Circuit finally set the record straight in Ernst and Haas Management Company, Inc. v. Hiscox, Inc., 23 F.4th 1195 (9th Cir. 2022), by repudiating a prior unpublished ruling and finding coverage for a social engineering theft under California law. This ruling gives policyholders a boost in their crime coverage claims for social engineering theft losses and removes a cudgel from the insurers’ hands. Continue Reading
