Help

BI’s Article search uses Boolean search capabilities. If you are not familiar with these principles, here are some quick tips.

To search specifically for more than one word, put the search term in quotation marks. For example, “workers compensation”. This will limit your search to that combination of words.

To search for a combination of terms, use quotations and the & symbol. For example, “hurricane” & “loss”.

Login Register Subscribe

AIG, Beazley units prevail in phishing case

Reprints
phishing

American International Group Inc. and Beazley PLC units prevailed Wednesday in litigation filed by a property management software company that was victimized by a phishing scheme, with an appeals court concluding the company was not entitled to coverage because it never held the stolen funds.

Richardson, Texas-based RealPage Inc. partners with online payment processors to collect rent from tenants and route those payments to property management companies, according to the ruling by the 5th U.S. Circuit Court of Appeals in New Orleans in RealPage Inc. v. National Union Fire Insurance Co. of Pittsburgh, Beazley Insurance Co., Inc.

Using an online platform RealPage maintains, tenants and property managers submit bank account and credit card information that RealPage transmits to third-party processors, which then process the rent payments based on RealPage’s instructions.

In April 2018, a RealPage employee clicked on a link purportedly from a third-party processor, San Francisco-based Stripe, Inc., and entered login credentials used to access the fund disbursement information Real Page provided to Stripes.

Using the stolen credentials, the criminals prompted Stripe to disburse more than $10 million designated for RealPage and its property manager clients to their own accounts.

Although RealPage and Stripe were alerted to the fraudulent activity and able to retrieve some of the disbursements, they could not recover $6 million, the ruling said.

RealPage reimbursed its property manager clients, then filed claims under its $5 million commercial crime insurance policy with AIG unit National Union Fire Insurance Co. of Pittsburgh and its $5 million excess fidelity and crime policy with Beazley Insurance Co.

National Union determined RealPage owned the funds that Stripe had earmarked as RealPage’s transaction fees and reimbursed the company $1.1 million. But the insurer denied coverage for the remainder of the stolen funds on the basis that RealPage neither owned nor leased those funds.

Beazley denied coverage on the basis its excess policy only provided coverage after the underlying National Union policy was exhausted.

RealPage sued National Union and Beazley in U.S. District Court in Dallas, which ruled in the insurers’ favor.  A three-judge appeals court panel affirmed that decision.

National Union’s coverage provides that policyholders must “hold” the funds involved, the ruling said. “Essentially, RealPage provided routing instructions to Stripe, and Stripe effectuated the transactions and handled the funds transferred from tenants to property managers,” the decision said.

“Because RealPage never held the funds at issue, National Union was within its rights to deny coverage of the stolen funds intended for RealPage’s property manager clients,” the decision said.

“And because National Union’s coverage was not exhausted, Beazley was also within its right to deny coverage under RealPage’s excess policy,” the panel said in affirming the lower court’s ruling.

Attorneys in the case had no comment or did not respond to a request for comment.