Ninth Circuit Rules in Travelers Case, Involving Social Engineering Fraud and Cyber Insurance

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The 9th U.S. Circuit Court of Appeals affirmed the district court’s ruling in Aqua Star (USA) Corp., vs Travelers Casualty and Surety Company of America. The case involved fraudulent emails purporting to be from the insured’s suppliers directing that the insured direct its payments to a new account purportedly opened by that supplier. Based on that fraudulent communication, the insured transferred $713,890 due its supplier to the fraudulent “new account.”

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Social Engineering Fraud and Cyber Insurance – Are You Covered?

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Spoofing and phishing are part of what is known as social engineering fraud. Social engineering fraud is typically a type of computer fraud where an employee is misled into believing he or she is communicating with a vendor and is tricked into sending money due that vendor to the fraudster. Many organizations take proactive measures to protect themselves through enhanced IT measures, employee training and the purchase of computer fraud and other types of cyber insurance.

A recent district court action in Washington illustrates how social engineering works and highlights the importance of understanding the limitations of the types of insurance coverages companies may have. The case is currently on appeal before the 9th U.S. Circuit Court of Appeals.

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