Fifth Circuit Reverses Judgment for Insurer Based on Contract Exclusion
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Fifth Circuit Reverses Judgment for Insurer Based on Contract Exclusion

A retail chain entered into an agreement with a third party service provider to process credit and debit card transactions. The retailer’s credit card network was hacked by unknown criminals and the payment processor had to reimburse the issuing banks the costs associated with the fraudulent transactions. It, in turn, sought reimbursement of costs, fees and fines, from the retailer claiming breach of their agreement in two separate demand letters that each established reserve accounts in accordance with the retailer’s indemnification obligation. Both demand letters were treated as a single “claim” under the policy. The retailer’s D&O insurer denied the claim and the insured filed a declaratory judgment action. The trial court granted judgment on the pleadings for the insurer based on the policy’s breach of contract exclusion. The Fifth Circuit reversed. It was unconvinced the breach of contract exclusion applied to the “not insignificant demands for non-monetary relief, wholly separate from the Merchant Agreement.”

Specs Family Partners Limited v Hanover Insurance Company