Unauthorized Debit Card Redemptions Are Not Covered By Computer Fraud Provision

Case:  InComm Holdings, Inc. v. Great American Ins. Co. Northern District of Georgia Case No. 1:15-cv-2671-WSD

In a decision that is likely to fuel debate over what constitutes computer fraud for purposes of insurance coverage, the U.S. District Court for the Northern District of Georgia recently held in InComm Holdings, Inc. v. Great American Ins. Co. that losses resulting from unauthorized debit card redemptions are not covered under the computer fraud provision of a multi-risk insurance policy.

The case involved a policyholder, InComm, which provides a debit card processing service that enables customers to load funds onto bank issued prepaid debit cards by using chits purchased from InComm at retailers such as CVS or Walgreens. After a customer purchases a chit, the retailer transfers the payment amount to InComm. The customer can then redeem the purchased funds on its debit card by calling a telephone number printed on the back of the chit and entering