Bad Faith Claim for Denial of Claim for Bitcoin Theft Survives Dismissal
In a first of its kind ruling, an Ohio trial court denied an insurer’s motion for judgment on the pleadings to dismiss a case alleging breach of contract and bad faith against a homeowner’s insurer. The insured made a claim alleging about $16,000.00 in Bitcoin was stolen from his digital wallet. The carrier investigated the claim and concluded the Bitcoin was “money” subject to a $200.00 sublimit under the policy. Relying on an IRS Notice that treats “virtual currency” as property, not money, for federal tax purposes, the court recognized Bitcoin as property in applying the insurance policy coverage limits and disregarding the sublimits. Accordingly, the insured properly plead claims for breach of contract and bad faith. Citing the novelty of this decision and the use of the word “currency” to describe property, as the case progresses the insurer has strong arguments to convince the court it did not act in bad faith.