The US District Court for the Eastern District of Pennsylvania recently determined that a $1.4 million wire transfer fraud was not covered under Ryeco, LLC, a fruit distributor's, commercial crime policy. Ryeco, LLC v. Selective Ins. Co., No. 2:20-cv-03182 (E.D. Pa. May 13, 2021). A hacker in South Africa had gained access to Ryeco's network, fraudulently applied the company's vice president's signature to wire transfer forms, and emailed these forms to Ryeco's bank, causing the funds to be transferred into a sham account.

Ryeco discovered the fraud, performed a forensic investigation, and obtained a coverage denial from Selective Insurance Company. Ryeco then sued Selective for coverage and breach of contract, urging that it was covered for the loss under the "Forgery or Alteration" crime policy it purchased from Selective. That policy explicitly covered "loss resulting directly from 'forgery' or alteration of checks, drafts, promissory notes, or similar written promises, orders or directions to pay a sum certain in 'money.'" Selective denied coverage because the forged wire transfer forms did not trigger the unambiguous terms of the policy, which covers "check, draft, promissory note or similar written promise." The court agreed, differentiating the forged emails and forms from checks and written promises. As such, it entered summary judgment for Selective.

Notably, it was undisputed that if Ryeco had purchased "Funds Transfer Fraud" coverage, it would have been reimbursed for its losses, a lesson worth taking in this atmosphere of increasing cybersecurity, phishing and ransomware attacks.

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