A Texas court reached a split decision in a dispute between an American International Group (AIG) unit and RealPage over the allocation of recovered funds from a phishing attack. The court ruled that RealPage, a property management software company, could retain part of the recovered funds, BestWire writes.
U.S. District Judge Jane J. Boyle, serving the Northern District of Texas, dismissed RealPage’s claim of insurance code violations.
The court found that, aside from legal costs, RealPage did not suffer actual damages from the policy misinterpretation (see How Does Cyber Security Hygiene Reduce the Risk of Cyberattacks?).
However, Boyle agreed with RealPage’s argument that the Allocation of Recovery Provision (ARP) applied only to covered losses. She ruled that the remitted funds were not subject to the allocation agreement.
The dispute began in 2018 when hackers stole $10 mn in a phishing attack. The stolen sum included $9 mn in rent owed to landlords and $1 mn in transaction fees due to RealPage.
RealPage reimbursed its clients for the stolen rent and sought coverage under its commercial crime policy with AIG’s National Union Fire Insurance Co. of Pittsburgh.
National Union agreed to pay $1.2 mn for the stolen transaction fees but denied the $9 mn reimbursement request, arguing that RealPage’s decision to repay clients was a separate loss not covered by the policy. A court upheld this decision (see Cyber Risk Detection, Insurance & Cyberattack Lifecycle).
Meanwhile, the U.S. Secret Service recovered $2.9 mn of the stolen funds. RealPage filed a successful petition, claiming a right to these recovered funds.
In 2020, National Union demanded RealPage return the $1.2 mn it had paid, citing the ARP, which states that recoveries should be applied net of recovery expenses. National Union argued that the remitted funds should be subject to this provision (see How Are Growing Cost of Ransomware Attacks Impacts for Insurance & Businesses?).
RealPage disagreed, stating the ARP only applied to recoveries of covered losses. The company maintained it was unclear whether the recovered funds pertained to the covered transaction fees or the client reimbursements.
National Union filed a breach of contract suit over RealPage’s refusal to reimburse, while RealPage countered with a claim of insurance code violations. Both sought summary judgments for their claims.
by Yana Keller
