In the recent case of The Brick v. Chubb Insurance, the Alberta Court of Queens Bench held that the plaintiff’s commercial crime policy did not cover the money lost by the plaintiff as a result of a social engineering fraud.
The plaintiff had been contacted by unknown persons pretending to be one of the plaintiff’s service providers, and requested banking information from their accounts payable department, which ultimately led to the plaintiff changing their internal records and sending of payments to the fraudsters’ own account instead of their service provider. The plaintiff sought coverage for the losses, and the insurer denied coverage.
The court noted that the policy only applied to fund transfers made “without the insured’s knowledge or consent”. The plaintiff argued that they did not consent, since their actions were induced by the fraudulent correspondence.
The insurer argued that the policy did not require consent to be “informed” or otherwise not induced by a fraud. The policy was only to cover fund transfers which were performed by a third party impersonating the plaintiff, not transfers made by the plaintiff to a third party impersonating a creditor. They argued that transfers made by the plaintiff were necessarily within the plaintiff’s knowledge and consent, even if they were transferred by a fraudulently-induced mistake.
In finding for the insurer, the court looked at the plain and ordinary meaning of “knowledge” and “consent”, and found that the plaintiff had knowledge and consent of the transfers, and in any event the transfers were not made by a third party.
Though not a lengthy or hotly contentious decision, it remains notable as a Canadian adjudication of a cyber insurance coverage matter. As larger and more online fraud and identity theft situations arise in Canada, it is expected that more decisions regarding cyber insurance policies will be released.
For parties seeking coverage for a cyber insurance risk, or for insurers underwriting or seeking to defend such coverages, it is important to involve counsel familiar with the most recent legal developments in these areas to provide you with early and effective legal advice.
If you have a cyber insurance dispute, or a fraud dispute, or other related matter, contact us for an initial consultation.
Brief informational summaries about insurance litigation, commercial litigation and family law litigation matters in the courts of Ontario and Canada are periodically published on our website. Please note that our website content is for informational purposes only, and should not be construed or relied upon to provide legal advice. If you require legal advice, please request an initial consultation with Gilbertson Davis LLP using the Request Consultation Form on this webpage or by contacting our Intake Coordinator on (416) 979-2020, ext. 223 (both subject to the Terms of Use described on our Contact page).
Comments & Opinions by Gilbertson Davis LLP lawyers and staff on its Blog, or in media interviews, appearances or publications, or in professional publications, are personal to them, and do not necessarily represent the opinions of the Firm or anyone at the Firm other than the individual expressing those comments or opinions.
About the Author
