A federal appeals court on Tuesday upheld a lower court’s ruling in favor of Chubb Ltd in a case involving a phishing attack.
Palm Harbor, Fla.-based Star Title Partners of Palm Harbor LLC, a settlement agent hired to close a residential real estate transaction, had a cyber protection policy with Chubb unit Illinois Union Insurance Co., according to the ruling by the 11th U.S. Circuit Court of Appeals in Atlanta in Star Title Partners of Palm Harbor LLC v. Illinois Union Insurance Co .
The home’s seller identified Lubbock, Texas-based Capital Mortgage Services of Texas as its lender and lien holder. A Star Title employee received a fraudulent email from someone purporting to be a CMS disbursement representative. She did not suspect fraud and sent a payment, which was not specified in the judgment, to the email sender.
Star Title did not have a policy in place to call the lender directly to verify wire transfer information, the ruling said.
Star Title filed a claim with Illinois Union under its cybercrime watch, which included a fraudulent transfer fraud insurance claim, the ruling said.
Chubb denied coverage because CMS was not a Star Title employee, customer client, or supplier required for coverage under its policy, and because it failed to verify the transfer request according to its procedures.
Star Title filed a lawsuit in US District Court in Tampa, Florida, which ruled in Chubb̵7;s favor. A unanimous three-judge appeals court panel affirmed the lower court.
Under the “plain meaning” of the policy terms that identify who is covered, “we agree with the district court that Star Title has failed to show that it is entitled to coverage under its policy,” said the ruling, which affirmed the lower court.
Attorneys in the case did not respond to requests for comment.
Last month, a federal district court ruled that a unit of Traveler Cos. Inc. correctly paid a phishing claim under its tort policy’s social engineering fraud coverage and refused to pay under its computer fraud policy, which offered much higher limits.