At the end of 2018, the Supreme Court of Vermont held that the “False Pretense” exclusion in a business-owner insurance policy did not exclude losses from a phishing scam. The case is Chocolate v. Sentinel Ins. Co., 1028 VT 140.

In May 2016, a Rainforest Chocolate LLC employee received an email allegedly from his manager directing him to transfer $19,875 to a specified outside bank account through an electric fund transfer. The employee followed the instructions of the “manager”. Soon after, Rainforest realized that the manager had not sent the email. This scheme is a phishing attack where a third-party fraudster impersonates a trusted source to trick the recipient of the email into wiring money to them, and is called a “Business Email Compromise” or a BEC. As a result of the BEC, Rainforest contacted the bank and froze the account, limiting their losses to $10,261. Rainforest sought coverage for the loss from its insurer Sentinel Insurance Co. Ltd., which denied coverage based on the “false pretenses” exclusion in the insurance policy. The “false pretense” exclusion excludes coverage for “physical loss or physical damage” stemming from “voluntarily parting with any property.”

Rainforest subsequently filed suit against Sentinel. The state court ruled in Sentinel's favor, which Rainforest appealed.