November 28, 2019
Insurance Coverage of Loss Due to Computer Hacking; Metal Pro Roofing, LLC v. The Cincinnati Ins. Co.
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In February 2013, plaintiffs discovered that someone had hacked into their bank accounts and stolen over $78,000. Plaintiffs made claims under Cincinnati insurance policies that provided for coverage against losses due to forgery or by theft by a person present inside the pertinent business premises. Cincinnati denied the claims and brought a declaratory judgment action to determine coverage. The plaintiffs
counterclaimed for breach of contract and for fraud by falsely representing that the policies would provide coverage for theft by computer hackers.
Cincinnati’s quotes for these policies stated: “Cincinnati can insure your money and securities…. You run the risk of loss from … computer hackers… Give yourself peace of mind with Cincinnati’s crime coverage to insure the money and securities you worked so hard to earn.”
The trial court granted summary judgment to Cincinnati and plaintiffs appealed.
The Court of Appeals affirmed summary judgment for Cincinnati on the coverage issues, finding there was no forgery of a signature as required by the forgery coverage and no check or other financial document was “altered” as required by the alteration coverage. It also found no thief present inside the pertinent business premises to which the “Inside the Premises” coverage would apply.
However, the Court of Appeals reversed the grant of summary judgment on the fraud claim. The quote specifically promised protection against “computer hackers” but the policies did not. Cincinnati argued that the plaintiffs had testified by deposition that this language had never been read by them and therefore, no reliance could be proved. The appellate court interpreted the record differently, finding deposition testimony that plaintiffs had not read the “policy language” but no testimony that they had not read the quotes.
The Court of Appeals also gave short shrift to this disclaimer in Cincinnati’s proposal: “This is not a policy. For a complete statement of the coverages and exclusions please see the policy.” The Court explained:
Cincinnati does not cite any authority for the proposition that such a disclaimer neutralizes otherwise misleading quote language. The trier of fact should decide whether the disclaimer in this case—which appears in fine print at the bottom of the quotes—had that effect.
Cincinnati also was unsuccessful in avoiding liability by claiming the quotes were provided by their insurance agency, Huntington Insurance, rather than by Cincinnati itself. Although Huntington may have delivered the quotes, Cincinnati drafted them and is subject to liability.
1. Losses due to computer hacking will often not be covered by traditional crime policies.
2. If, nonetheless, an insurance carrier represents that the policies will protect against loss due to computer hacking, a fraud remedy may be available.
3. A fine print disclaimer is unlikely to protect the carrier from such a misrepresentation claim.