During a closing on a real estate transaction, cyber criminals sent new instructions via e-mail for sending the monies.   Insured did not verify by a phone call or other means that the new instructions changing the account numbers was correct.  $150,000 was sent to the cyber criminals via ACH as a result and the money is gone. 

Fortunately for the insured, there was coverage for fraudulent wire transfers up to $150,000 per claim and per policy year.  This happened 3 months into the policy.  To save money at renewal, against our advice, the insured had dropped coverage for much higher limits.  Good news is the insured was made whole.

No carrier writes a standalone short term policy for this type of coverage.  Because of the recent loss the cost of adding even an annual policy for this coverage will be much more expensive than if the old coverage had been maintained.  Whether a stand-alone properly endorsed Cyber policy or a properly endorsed Crime is obtained, they will be written on a claims-made policy form.  This means that the coverage will remain inforce only for as long as continuous claims-made coverage is maintained.

The insured’s thought process is that normally knowing of claims for these types of losses is fairly quick.  Bad news is that the only carriers that will write coverage after a recent claim will be in the surplus lines market place.  Claims-made coverage make terrible short term policy coverage vehicles.  So if insured ways to only ‘temporarily’ obtain coverage, many surplus lines policies only permit the insured to purchase an Extended Reporting Period Endorsement (ERP) if the insurer is unwilling to provide renewal terms. 

End result is that for saving a few hundred dollars at renewal, insured is now faced with purchasing additional coverage that will likely cost a few thousand dollars.  If insured wants to protect these past acts past the expiration date, the insured will be looking at a few thousand dollars more for the ERP.

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