Case study: email fraud claim fell between the insurance cover cracks
Published 05 October 2021
When a sporting organisation fell prey to a classic social engineering scam by paying a fraudulent invoice the loss of money didn’t appear to be eligible for claiming under its insurance cover at the time. Cyber security-related losses can be a grey area, particularly when a business’s own employees are involved, but luckily subsequent legislation enabled Gallagher to ensure the claim was resolved favourably.
The organisation concerned was unaware that an external hacker had intercepted an email exchange with one of its suppliers and generated a fraudulent invoice until several weeks after payment had been made. By then payment to the real supplier was overdue and they wanted to know when the account would be settled. At this point the sporting organisation realised that something had gone amiss.
Believing it to be a systemic error both the sporting organisation and the supplier undertook internal investigations in order to identify where the issue had arisen. It was then that the defrauded business determined that the payment had been made into a different bank account from their supplier’s.
When the organisation tried to make a claim for the loss the circumstances of the fraud meant that it wasn’t covered by any of the policies in place. It looked as if the sporting organisation would have to absorb the loss.
The next year, in 2020, the Australian Financial Complaints Authority (AFCA) released a decision that the interception of an invoice which results in a client suffering a financial loss is deemed a direct loss.
ruling decision changed the claim scenario so that the sporting organisation was actually covered under its ‘direct financial loss by the client’ insurance sub-limit and was eligible to receive recompense.
The Gallagher difference
Our Gallagher claims advocate stayed up to date on ruling and interpretation changes to legislation to ensure that all possible avenues for payment were reviewed. In this case this enabled the fraud victim to make good on its loss.
[SUBHEAD] We pride ourselves on our claims service
Part of our commitment to building business confidence is fighting for what’s right, and supporting clients through claims is one of our key pillars of business practice.
Gallagher claims expertise and 17 case studies are outlined in the Gallagher Advocacy in Action report where you can read more about this oil production claim in detail and other examples from professional indemnity to corporate travel.
Gallagher provides insurance, risk management and benefits consulting services for clients in response to both known and unknown risk exposures. When providing analysis and recommendations regarding potential insurance coverage, potential claims and/or operational strategy in response to national emergencies (including health crises), we do so from an insurance and/or risk management perspective.