Corporate Governance » Are Spoof Victims Covered By Computer Fraud Insurance?

Are Spoof Victims Covered By Computer Fraud Insurance?

MASKS CURTAINS 21533934 420

August 21, 2017

Spoofing, sometimes known as “payment instruction fraud,” typically involves a phony invoice or an instruction to wire funds to an offshore account. These schemes, although rare, have become increasingly sophisticated and have bilked victims out of millions. Will such losses be covered by computer fraud insurance? It’s an open question, writes Peter S. Selvin, as he surveys some of the recent case law. In general, the answer has been no.  As one court said, to interpret a computer fraud provision to encompass any fraud in which computer communication was part of the process would “convert the computer-fraud provision to one for general fraud.” More recently two federal court cases, decided within days of each other, came to decidedly different conclusions, one of them running counter to that interpretation. The upshot, Selvin writes, is that there is a sharp split among courts about whether spoofing is covered, but insureds now do have at least one useful precedent.

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