Judge rules in favor of Erie in 2019 fraud scheme dispute with insurance company [Daily Camera, Boulder, Colo.]

Daily Camera (Boulder, CO)

Sep. 19—A judge's ruling has paved the way for Erie to continue to pursue reimbursement from a 2019 fraud scheme.

According to an Erie email, on Aug. 23 a U.S. District Court judge issued a ruling in the town's favor in Erie's lawsuit against National Union Fire Insurance Company.

Judge Daniel D. Domenico ruled the money stolen in the 2019 fraud scheme resulted from direct use of a computer and triggered the town's computer-fraud insurance coverage with National Union. Domencio also stated Erie is entitled to coverage and National Union breached its contract with the town to cover the losses.

Erie will seek an award of $766,234 in damages, plus interest.

"Local governments must use multiple defenses against cyber criminals and plan for the worst-case scenario. Having insurance coverage is just one part of that planning, and we are happy the court decision will enable the town to be fully reimbursed for the funds stolen by cyber criminals in 2019," Town Administrator Malcolm Fleming wrote in the email.

In 2019, someone pretending to be with SEMA Construction, the primary contractor for Erie Parkway Bridge, requested a change in payment form. In October 2019, the town processed two payments for the construction work, totaling over $1 million. The town was notified of potential fraud in November 2019, and SEMA confirmed the company had not received payment.

Erie's primary insurer CIRSA paid Erie what was due, $150,000, and National Union paid the town $100,000 on its claim but denied the remaining portion of the claim. Erie took National Union to court after the insurance company refused to pay the remainder of the claim.

Before the court makes the award of $766,234 in damages plus interest, it must also rule in favor of Erie's additional claim of "bad-faith denial of benefits" under the insurance policy. According to the email, National Union asked the court to dismiss the motion, but was denied.

Both parties will prepare for a trial on the claim in early 2024. If the courts rule in favor of Erie's additional claim, the town will pursue additional damages, attorney's fees, and costs on top of the $766,234 for breach-of-contract damages and interest.

The email states Erie has since taken actions to prevent cyber fraud including monthly cyber security training for all town employees.

More information is available at tinyurl.com/ErieFraudCaseProgress.

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