Claim under Cyber Policy Fails

    The insured's claim failed to fall within coverage under the cyber policy. Ford L.L.C. v. Lexington Ins. Co., 2023 U.S Dist. LEXIS 177426 (W.D. La. Oct. 2. 2023).

    The insured, Benoit Ford, LLC and Benoit Nissan, LLC, sought coverage under their cyber policy after the theft of vehicles. Benoit owned and operated two car dealerships. In 2020, Benoit developed a touchless purchasing procedure to adapt to the COVID-19 pandemic. A prospective buyer could purchase a vehicle online by submitting a credit application to the respective lender. Once the application was approved, the buyer and Benoit would complete the registration, title and other paperwork electronically or by overnight mail. The lender would tender the purchase price to Benoit, who would assign the credit agreement to the lender. The buyer would then contract with a third-party to arrange transport from the Benoit's dealership to the buyer. 

    At one point, the lenders discovered that purchases were made through the buyers' use of either a fake or stolen identity, and no payments on the credit agreement were forthcoming from the "purchasers." The lenders required Benoit to reimburse the purchase price for the vehicles. 

    Benoit sought coverage under its cyber policy. The insurers denied coverage and Benoit sued. The carriers moved to dismiss because there was no coverage under the cyber policy for losses suffered by Benoit resulting from the theft of the vehicles. 

    For third-party coverage under the policy, the policy stated, "We will pay on your behalf claim expenses and damages that you become legally obligated to pay resulting from a claim against you." Benoit failed to state a valid third-party claim because no facts indicated there was a claim against Benoit causing it to be legally obligated to pay any damages. 

    Nor did the complaint allege first party coverage for a vehicle theft. None of the policy's provisions for first party coverage were triggered, including Breach Response, Business Interruption, Cyber Extortion, Digital Asset Restoration, Service Fraud, Computer Replacement, Invoice Manipulation, Reputational Harm Loss, Criminal Reward Costs and Crisis Management and Public Relations Coverages.

    Therefore, the motion to dismiss was granted.