Ride the Lightning

Company Sues Cyber Insurer Over $480,000 Loss in BEC Scam

February 1, 2016

Business e-mail compromise (BEC) and CEO fraud schemes are becoming increasingly costly. According to the FBI, thieves reaped nearly $750 million in such scams from more than 7,000 U.S. companies between October 2013 and August 2015.

While you may think your cyber insurance covers such losses, perhaps it does not. KrebsonSecurity reported that Texas manufacturing firm AFGlobal Corp. recently sued Federal Insurance Co., a division of Chubb Group, for denying coverage of a BEC scam in which scammers impersonating the company's CEO persuaded the company's accountant to wire $480,000 to a bank in China. This is the second time Federal Insurance Co. has been sued for denying a similar claim.

The insurer denied AFGlobal's claims saying that the BEC and CEO fraud did not involve the forgery of a financial instrument as required by the policy.

Strongly advised: Read the facts in both cases and then take a very close look at your cyber insurance policy. You may have been falsely comforted to think that BEC and CEO scams were covered when they are not.

Hat tip to Dave Ries.

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