Cybersecurity - Loss Due To Social Engineering Attack Covered Under Insurance Policy

As the number and sophistication of social engineering attacks increases, victims are examining their insurance policies to see if they are covered. In The Brick Warehouse LP v. Chubb Insurance Company of Canada, 2017 ABQB 413, and in Taylor & Lieberman v. Federal Insurance Company, 2017 WL 929211 (March 9, 2017 9th Cir.), fraudulent emails, as part of a social engineering attack, were sent to company employees who acted on them transferring money from the insured's account. In both cases courts held that coverage under the Fund Transfer Fraud policy was denied as the victim knew or consented to the instructions given to its bank rather than by way of third party instructions impersonating the insured, which would have been covered by the policy. Of note, the Alberta Court relied on legal developments in the United States in its decision.