Second Circuit: Computer Fraud Coverage Section Covers Fraudulent Email Funds Transfer

In a much anticipated decision, on July 6, 2018 the Second Circuit, applying New York law, affirmed a district court ruling that the computer fraud provisions of a commercial crime coverage section covered the losses Medidata incurred when the company’s employees transferred funds in response to a spoofed email. The appellate court’s opinion could prove valuable for other policyholders seeking to establish that their crime policies provide coverage for losses incurred as a result of social engineering fraud (also known as payment instruction fraud). The Second Circuit’s July 6, 2018 opinion can be found here.    Background Medidata Solutions, Inc. provides cloud-based services to research scientists. It maintains its email through the Gmail platform. The company’s email appears with the company’s domain name in the email address; if an email address matches that of a Medidata employee, the sender’s full name, email address, and…

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