Ernst & Haas Management Co. v. Hiscox, Inc.

facts here; and (2) improper reliance on Pestmaster’s embezzlement-based analysis led to a flawed interpretation of the computer fraud provision and how it applied to the pleaded facts of this case. Here, Ernst immediately lost its funds when the funds were transferred as directed by the fraudulent email, and there was no intervening event. The panel held that, taking the pleaded facts as true, Ernst suffered a loss resulting “directly” from the fraud, arguably entitling Ernst to coverage under the policy. The panel remanded with instructions to reconsider the case with the recognition that Ernst’s loss fell within the Computer Fraud provision of the 2012 policy.

The panel held that the Funds Transfer provision also covered Ernst’s loss resulting directly from the fraudulent email instruction. The district court erred when it reasoned that Ernst’s alleged loss did not result directly from fraudulent instructions. Here, the fraudulent email directed the Ernst employee to transfer funds, provided wire details, and provided fraudulent authorization. The Ernst employee initiated a wire pursuant to the fraudulent authorization, resulting in Ernst’s loss. The panel remanded with…