Guide
Does cyber insurance or crime coverage address payment fraud?
Written and reviewed by Michael LaBarbera, licensed insurance agent
Cyber insurance addresses specified data and network exposures, while crime coverage addresses specified theft and fraud exposures involving money or property. A fraudulent payment request can involve both, so a design firm should review social engineering, funds-transfer and employee dishonesty wording rather than assuming its cyber policy covers stolen funds.
What are the key facts?
| A cyber incident and a theft of funds are not identical exposures. | [1] |
| Social engineering coverage depends on specific policy wording. | [1] |
| Crime and cyber policies can have different reporting conditions. | [1] |
| Cyber coverage includes defined protections, not every loss involving email. | [2] |
Why does the method of loss matter?
A compromised network and an authorized payment induced by deception can trigger different provisions.
An engineering firm might receive a convincing request to change a subconsultant’s bank details without its own network being breached. Conversely, an intruder could access project files and interrupt operations without stealing funds. Record what happened, who acted, which systems were involved and how payment was initiated. Those facts help the insurer evaluate the applicable coverage instead of treating every email-related incident as the same event.
Sources: [1]
Which policy details should the firm ask to see?
Request the relevant fraud, funds-transfer, employee dishonesty and incident-response provisions.
Check sublimits, deductibles, verification conditions and exclusions as well as the policy’s headline limit. Ask whether a loss caused by impersonating a client, principal or supplier is addressed and whether employee involvement changes the analysis. Do not assume a feature is included because it appears in a brochure. The issued form and endorsements determine the actual protection available for the firm’s circumstances.
What payment controls belong in the conversation?
Discuss independent verification of changed payment instructions and separation of payment responsibilities.
A message can use familiar project names, signatures and invoice details while still being fraudulent. Verify changed bank information through a previously trusted contact method rather than a number supplied in the new request. Document the verification process and explain it during underwriting. Controls are not a substitute for coverage, but the application and policy may ask about how payments are checked before release.
Sources: [1]
What should I do if funds have already been sent?
Contact the financial institution promptly and follow the applicable insurer’s reporting instructions.
Preserve messages, transaction details and relevant system records. Notify the agency so it can help identify the appropriate policy reporting contacts, but do not assume that an agency conversation satisfies every insurer notice requirement. Avoid promising reimbursement or arranging recovery expenses without checking approval conditions. If multiple policies might apply, coordinate the reports and keep a record of when each notification was made.
Frequently asked questions
Does using email automatically make a loss a cyber claim?
No. The loss facts and the actual insuring agreements need to be examined.
Is employee dishonesty the same as outside impersonation?
No. Different crime or fraud provisions may apply depending on who caused the loss.
Should an outsourced bookkeeper be disclosed?
Describe payment responsibilities and outside service providers accurately during the insurance review.
Can a client’s policy be assumed to protect our lost funds?
No. Review the firm’s own coverage and the relevant contractual arrangements.
What are the sources?
Policy forms and endorsements control; this is not legal advice or a coverage decision.
Carrier names identify markets quoted through our agency. Availability depends on underwriting, state, policy wording and endorsements; this is not an offer of coverage.
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