Loss not covered by policy’s Fraud and Alternation Endorsement as the fraudulent electronic transfers did not involve a check, draft, etc. and the loss fell within the policy’s exclusion for losses caused by malicious code or system penetration

The plaintiff was a real estate brokerage firm conducting business in Georgia. Thieves illegally logged into the plaintiff’s bank account and stole more than $188,000. The plaintiff filed a claim for the loss with its insurance policy with the defendant, who denied coverage based on the policy’s malicious code and system penetration exclusions. The plaintiff argued that the loss was not excluded, that it was covered by the policy’s Fraud and Alteration (F&A) endorsement. The district court determined that the plaintiff’s loss was not covered by the F&A Endorsement for two reasons: (1) the fraudulent electronic transfers did not involve a check, draft, promissory note, bill of exchange or similar written promise, order or direction to pay a sum certain; and (2) the plaintiff’s loss fell within the policy’s exclusions for losses caused by malicious code or system penetration. As a result, summary judgment was entered in favor of defendant. The 11^th Circuit Court agreed with the district court and affirmed. The court considered that the electronic fund transfer did not involve a check, draft, promissory note, etc. It also considered that the plaintiff had failed to demonstrate that the theft involved the signing of a name, as required under the policy’s definition of “forgery.” The court agreed that the plaintiff’s claim fell under the policy’s malicious-code exclusion. Thus, the district court’s grant of summary judgment was affirmed.

_{Case Law Alerts, 3rd Quarter, July 2015}

_{Case Law Alerts is prepared by Marshall Dennehey Warner Coleman & Goggin to provide information on recent legal developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. Copyright © 2015 Marshall Dennehey Warner Coleman & Goggin, all rights reserved. This article may not be reprinted without the express written permission of our firm.}