AIG and Beazley items prevail within the case of phishing – Enterprise Insurance
The entities of American International Group Inc. and Beazley PLC prevailed Wednesday in a lawsuit filed by a property management software company that was hit by a phishing program.
RealPage Inc., based in Richardson, Texas, is working with online payment processors to collect rents from tenants and forward those payments to property management companies, according to the judgment of the 5th New Orleans Court of Appeal in RealPage Inc. v National Union Fire Insurance Co. of Pittsburgh, Beazley Insurance Co., Inc.
Through an online platform maintained by RealPage, tenants and property managers submit bank account and credit card information that RealPage transmits to third party processors who then process rental payments as directed by RealPage.
In April 2018, a RealPage employee clicked a link allegedly provided by a third party company called Stripe, Inc. of San Francisco and entered the credentials used to access the payout information provided to Real Page Stripes had.
With the stolen credentials, the criminals arranged for Stripe to withdraw more than $ 10 million into their own accounts for RealPage and its property management customers.
Although RealPage and Stripe were made aware of the fraudulent activity and were able to reclaim some of the withdrawals, they were unable to reclaim $ 6 million, the ruling said.
RealPage reimbursed its property management client and then filed claims under its trade crime insurance policy for $ 5 million.
National Union found RealPage owned the funds Stripe had earmarked as transaction fees from RealPage and refunded the company $ 1.1 million. However, the insurer refused to cover the rest of the stolen funds on the grounds that RealPage neither owned nor rented those funds.
Beazley was denied coverage based on his deductible policy, which only provided coverage after the underlying National Union policy was exhausted.
RealPage sued National Union and Beazley in the US District Court in Dallas, which ruled in favor of the insurers. An appeals court consisting of three judges upheld this decision.
The coverage of the National Union provides that policyholders must "hold" the funds involved, it says in the judgment. "Essentially, RealPage gave Stripe instructions on how to forward them, and Stripe executed the transactions and processed the funds transferred by tenants to the property managers," the decision said.
"Since RealPage never held the funds in question, the National Union was entitled to refuse to cover the stolen funds that were intended for RealPage's property managers," the decision said.
"And because the reporting of the National Union was not exhausted, Beazley was also entitled to refuse reporting under RealPage's excess policy," the panel confirmed the judgment of the lower court.
Lawyers in the case had no comments or did not respond to requests for comment.