Jonathan L. Schwartz

All articles by Jonathan L. Schwartz

 

Sixth Circuit Uses Every Tool in the Box To Build Case for Coverage for Defrauded Policyholder

July 12, 2018, we reported on the Medidata decision handed down by the Second Circuit in which the court found coverage for a claim resulting from social engineering fraud. We suggested the ruling in Medidata lacks persuasive power due to its unusual factual circumstances and atypical policy language. The Sixth Circuit’s decision in American Tooling Center, Inc. v. Travelers Casualty & Surety Co. of America, No. 17-2014, 2018 WL 3404708 (6th Cir. July 13, 2018), will have more persuasive power, but due to…  

Second Circuit’s Decision Upholding Social Engineering Fraud Coverage Likely a Paper Tiger

In a case closely monitored by the insurance industry, the Second Circuit upheld in a non-precedential summary order a New York federal district court’s summary judgment finding coverage under the computer fraud coverage of a commercial crime policy. Medidata Solutions, Inc. v. Fed. Ins. Co., No. 17-2492, 2018 WL 3339245 (2d Cir. 2018). Although the policyholders are apt to tout the decision as a seismic victory, the atypical policy language and factual circumstances should greatly limit its persuasive value. As background, the insured, Medidata…  

Fifth Circuit Shops for Implicit Allegations Wrongdoing Against Liquor Store Chain To Avoid Policy Exclusion

The Fifth Circuit Court of Appeals in Spec’s Family Partners, Ltd. v. Hanover Insurance Co. (No. 17-20263, Jun. 25, 2018), afforded a contractual liability exclusion a narrow interpretation to deny an insurer judgment in its favor.  The coverage litigation resulted from Hanover Insurance Company’s (Insurer) refusal to pay Spec’s Family Partners’ (Spec’s) litigation costs in connection with a payment card industry (PCI) liability dispute between Spec’s and First Data Merchant Services, LLC (First Data) following a data breach. The Spec’s credit card network had been…  

No More Chits to Call In: Computer Crime Policy Does Not Cover Fraudulent Transaction

In Interactive Communications International, Inc. v. Great American Insurance Company, a lawsuit closely monitored by those in the cyberinsurance space, the Eleventh Circuit affirmed a Georgia federal court’s decision, finding an insurance policy’s “Computer Fraud” coverage did not extend to certain losses caused by fraudsters. The decision comports with other recent decisions finding that social engineering fraud schemes do not satisfy the policy’s requirement of losses resulting directly from the use of a computer. Here, the devil was in the details. InComm operated a…  

Something to Keep an Eye On: Insurers and Insureds to Duke it Out in Data Breach Coverage Suit

A new Indiana coverage litigation regarding a CGL policy (and umbrella policy) may provide more guidance about how courts will approach data breach coverage under traditional insurance products. In National Fire Insurance Company of Hartford v. Medical Informatics Engineering, Inc. et al. (N.D. Ind., No. 16-cv-152), two CNA companies initiated a declaratory judgment action seeking a ruling they do not have the duty to defend or indemnify Medical Informatics Engineering, Inc. or NoMoreClipboard, LLC (collectively Medical Informatics) in relation to lawsuits filed against Medical Informatics. …  

Credit Card Payment Coverage Declined: Cyberinsurer Not Obligated to Reimburse P.F. Chang’s for PCI Liability

In the most significant cyberinsurance coverage decision to date, an Arizona federal district court in P.F. Chang’s China Bistro v. Federal Insurance Co., No. CV-15-01322-PHX-SMM (D. Ari. May 31, 2016), granted summary judgment to Federal Insurance Company, acknowledging it had no duty to reimburse P.F. Chang’s China Bistro for payment card industry liability assessments under the CyberSecurity policy issued by Federal to P.F. Chang’s corporate parent. This decision represents a significant victory for cyberinsurers insofar as it upholds insurers’ marketing strategy of making available…  

Connecticut Supreme Court Makes Significant Ruling in Data Breach Case

The Connecticut Supreme Court made a very significant ruling yesterday in Recall Total Information Management, Inc. v. Federal Insurance Co., adopting wholesale the Appellate Court’s well-reasoned ruling that an insured’s loss of sensitive records, without more, does not constitute a “publication” of material that violates a person’s right of privacy. Notably, the Appellate Court held that absent proof of an unauthorized third party’s access to the personal identification information, the “publication” element of the Privacy Offense (under the definition of “personal and advertising injury”…