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Hacked Emails Will Cost You More Than You Realize

July 1, 2022

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<p style="text-align: justify;">In a recent case from the Eastern District of PA, <em><a href="">Constr. Fin. Admin. Serv. LLC v. Fed. Ins. Co.,</a> </em>the court upheld an insurance company’s exclusion for “hacked” losses.  The plaintiff/policyholder in the case brought suit against its insurer after it mistakenly sent wire transfers to a foreign company after receiving fraudulent emails vis a vis a client contractor.</p>
<p style="text-align: justify;">The plaintiff construction company sent $1.3 million dollars in funds to a foreign account after receiving emails from a client contractor. However, it was later demonstrated that the email had been hacked and scam messages to the plaintiff precipitated the transfer. The plaintiff was able to recover around $127,000 dollars through police intervention, and sought coverage for the rest from its carrier.  Unfortunately for this policyholder, the policy as written did not cover “social engineering.” Under Pennsylvania law, the insured has the burden “to establish coverage under an insurance policy” and the court held there was no dispute of material fact, that the policy was clear, and it did not cover hacking.</p>
<p style="text-align: justify;">Thanks to Kevin Riley for his contribution to this post.  Should you have any questions, please do not hesitate to contact <a href="">Tom Bracken</a>.</p>


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