Pestmaster Services, Inc. v. Travelers Casualty & Surety Co. of America

MEMORANDUM

The district court granted summary judgment to Travelers Casualty and Surety Company on the ground that Pestmas-ter’s losses were not covered under its Crime Policy. Pestmaster appeals this decision, alleging coverage under two provisions.

First, Pestmaster argues that the transfer of funds from its bank account to Priority l’s bank account is covered by the Funds Transfer Fraud provision. The district court found that this provision “does not cover authorized or valid electronic transactions ... even though they are, or may be, associated with a fraudulent scheme.” We agree that there is no coverage under this clause when the transfers were expressly authorized.

Second, Pestmaster seeks coverage under the Computer Fraud provision. The Policy defines Computer Fraud as “[t]he use of any computer to fraudulently cause a transfer.... ” We interpret the phrase “fraudulently cause a transfer” to require an unauthorized transfer of funds. When Priority 1 transferred funds pursuant to authorization from Pestmaster, the transfer was not fraudulently caused. Because computers' are used in almost every business transaction, reading this provision to cover all transfers that…