Michigan Federal Court Finds No Coverage for Policyholder Duped By Fake Email

A policyholder was tricked by emails ostensibly from a vendor invoicing for work provided and sent $800,000 to the fraudster’s account.  In an action filed by the insured, a federal district court for the Eastern District of Michigan has agreed with the insurer there is no coverage for the loss.  The policy’s “computer crime” insuring agreement goes to “direct loss” of money “directly caused by” the “use of any computer.  According to the court, there were “intervening events between” receipt of the emails and transfer of the funds which “preclude a finding of ‘direct’ loss ‘directly caused’ by the use of any computer.”  The court, citing other jurisdictions’ cases about fraudulent emails, said “there was no infiltration or ‘hacking’” of the insured’s computer system and that the emails, although received via computer, “did not directly cause the transfer of funds.”  Instead, the policyholder itself took all the steps to effect the dispatch of the funds based on information in the emails. American Tooling v Travelers (E.D. Mich Aug. 1 2017). v. Travelers Cas. & Sur. Co., No. 16-12108 (E.D. Mich., Aug. 1, 2017).