RealPage Inc v. National Union Fire Insurance Company of Pittsburgh PA and Beazley Insurance Company, Inc.

Clark Hill successfully represented Beazley Insurance Company Inc. National Union Fire Insurance Company of Pittsburgh PA was assisted by Lugenbuhl Wheaton Peck Rankin & Hubbard and Gray Reed & McGraw LLP. Pillsbury Winthrop Shaw Pittman LLP and Brown Fox PLLC
acted for RealPage, Inc.

In a major win for the industry, a federal district court, applying Texas law, entered summary judgment for primary and excess insurers involving a claim for computer fraud and funds transfer fraud coverage under a Commercial Crime Policy.

The insured, RealPage, Inc., provides a service to owners and operators of residential properties whereby tenants can go online and arrange for their rental payments to be made by credit card or ACH bank transfer. The tenants’ payments are deposited in a bank account belonging to Stripe, Inc., a third-party payment processor.  Stripe then directs its bank to transfer most of the funds to bank accounts belonging to RealPage’s customers, based on information supplied by RealPage.

Imposters used a phishing email to obtain the credentials of a RealPage employee and were able to change the bank account information for the transfers from Stripe’s bank account. After approximately $10 million was diverted by the imposters, RealPage voluntarily reimbursed its customers for their losses and sought reimbursement from National Union and Beazley for the payments.

The court entered summary judgment for the insurers because: Stripe, not RealPage, was in possession of the relevant bank account funds at the time of the theft, and thus RealPage did not “hold” or possess them; the payments to the customers did not involve a “direct loss,” and the indirect loss exclusion applied to preclude coverage.

After a detailed analysis of the issues, the court held that the covered property condition in the primary policy required either ownership or physical possession by the insured for potential coverage. Mere “control” of the property is insufficient.  The court also rejected RealPage’s claims against National Union under the Texas Insurance Code.

Beazley Insurance Company Inc. was assisted by lawyer Michael Keeley (Picture). 

National Union Fire Insurance Company of Pittsburgh PA was assisted by Ashley Belleau of Lugenbuhl Wheaton Peck Rankin & Hubbard and by Darin Lee Brooks, Kenneth Stone, and Trenton Kyle Patterson by Gray Reed & McGraw LLP. 

Pillsbury Winthrop Shaw Pittman LLP, working alongside Cort Thomas of Brown Fox, acted for RealPage with a team including Barry Fleishman, Tamara Dawn Bruno and Vincent Morgan. 

 

 

 

 

 

Involved fees earner: Cort Thomas – Brown Fox PLLC; Michael Keeley – Clark Hill; Darin Brooks – Gray, Reed, & McGraw PC; Trenton Patterson – Gray, Reed, & McGraw PC; Kenneth Stone – Gray, Reed, & McGraw PC; Ashley Belleau – Lugenbuhl Wheaton Peck Rankin & Hubbard; Tamara Bruno – Pillsbury Winthrop Shaw Pittman LLP; Barry Fleishman – Pillsbury Winthrop Shaw Pittman LLP; Vincent Morgan – Pillsbury Winthrop Shaw Pittman LLP;

Law Firms: Brown Fox PLLC; Clark Hill; Gray, Reed, & McGraw PC; Lugenbuhl Wheaton Peck Rankin & Hubbard; Pillsbury Winthrop Shaw Pittman LLP;

Clients: Beazley Insurance Company, Inc.; National Union Fire Insurance Company of Pittsburgh; RealPage, Inc. ;

Author: Martina Bellini