The 9th Circuit U.S. Court of Appeals on Monday revived part of a financial services company’s $40 million coverage dispute with two insurers, finding a lower court erred when finding that uploading fraudulent data to its system could trigger its commercial crime policies.

A three-judge panel said in Cachet Financial Services v. Berkley Insurance Co. et al. that the uploading of fraudulent batches of information by payroll companies MyPayrollHR and iGreen Payroll Services Inc. to Cachet’s computer system could be considered a “fraudulent entry” under policies issued by Berkley Insurance Co. and Great American Insurance Co.

“Although Cachet authorized the remarketers to upload the electronic batch files onto its server, the authorized submission of fraudulent electronic data into Cachet’s computer system can arguably be described as a ‘fraudulent entry,’” the court wrote.

The appeals court, however, agreed with the lower court that the fraudulent information uploaded by the payroll firms was not altered, and did not fall within the policies’ forgery or alteration insuring agreement.

Pasadena, California-based Cachet contracted with MyPayroll HR and iGreen for use of its automated clearing house transactions. As part of the agreement, the payroll services would upload information into Cachet’s computer system to route payments to employees. Cachet contends that the companies uploaded fraudulent information into its system, resulting in $40 million in losses.

Cachet sued the insurers after they denied coverage for the loss. The trial judge dismissed Cachet’s claims for breach of contract and bad faith after finding that the loss did not fall within the policies’ coverages for forgery and alteration and computer and funds transfer fraud.

Although the panel agreed that the information uploaded by the payroll services companies was not altered, their use of Cachet’s computer system could be a fraudulent entry. The appeals court also said the trial judge should consider if an authorized access exclusion was applicable.

Representatives for the parties did not respond to requests for comment.