Hunton Insurance Recovery Blog

Hunton & Williams insurance practice head Walter Andrews commented in a July 25, 2017, Law360 article concerning a New York federal court’s recent decision in Medidata Solutions, Inc. v. Federal Ins. Co., where the court found coverage for a $4.8 million “social engineering” loss that occurred after Medidata received fraudulent emails that caused accounting personnel to wire funds to a fake bank account in China. The decision, which was the subject of a July 24, 2017, Hunton blog post, focused on two main issues: (1) whether the fraudulent emails amounted to an infiltration of the bank’s computer systems; and (2) whether the fact that Medidata employees voluntarily initiated the funds transfer mattered under the terms of Medidata’s commercial crime insurance policy. Andrews succinctly addressed both issues, stating that “an employee being duped into transferring funds via email is functionally the same as the funds being stolen outright.” With the latter being unquestionably covered, so too should the former.