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Incorrect allegations mean no duty to defend under cyber policy, rules Utah court

A federal district court in Utah has ruled that an insurance company had no duty to defend its insureds under a cyber liability policy when the allegations against the insureds alleged knowledge, willfulness, and malice instead of errors, omissions, or negligence.

By Steven A. Meyerowitz, Esq., Director, FC&S Legal | Updated on June 17, 2015

A federal district court in Utah has ruled that an insurance company had no duty to defend its insureds under a cyber liability policy when the allegations against the insureds alleged “knowledge, willfulness, and malice” instead of “errors, omissions, or negligence.”

Global Fitness owns and operates fitness centers in several states with numerous members who provided either credit card or bank account information through which Global Fitness could bill the members (Member Accounts Data.). Federal Recovery Services, Inc. (FRS) and Federal Recovery Acceptance, Inc. (FRA) dba Paramount Acceptance (together, the defendants) provide processing, storage, transmission, and other handling of electronic data for customers. Like many merchants, Global Fitness entered into a Servicing Retail Installment Agreement with FRA that required FRA to process the Member Accounts and transfer the members’ fees to Global Fitness.

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