Phishing Scam Meets “Fraudulent Instruction” Requirement
A Liberty Mutual Insurance Group unit challenged its coverage obligations under its commercial crime insurance policy after a phishing scam resulted in a loss of more than $1.7 million to its insured. A scammer posed as an executive of the company and persuaded an employee to wire money to a foreign bank account. After discovering the fraud and determining it could not recover the funds, the insured sought coverage under the “fraudulent instruction” provision of its policy. The carrier denied the claim alleging the scammer’s communications with the employee did not meet the conditions for a fraudulent instruction and that the loss did not result directly from the alleged fraudulent instruction—a policy requirement. Both the lower court and the 11th Circuit concluded the policy unambiguously covered the claim finding the nefarious email unambiguously directed a financial institution to transfer funds.