there was a fraudulent instruction and that's a defined term in quotations in the policy that directed a bank to transfer funds and then the second one is if so whether or not the loss claimed b the insured which at the time was principal solutions was a result of directly from such a fraudulent transfer we maintain that there was neither i fraudulent instruction is defined in specific ways under the policy the definition issue in this case concerns what's called a spoof email it's a phishing scheme where someone sends an e mail  purporting to be from missed in the zarian who was the owner of the company to the controller a woman named lo and lien telling her that there was a purchase coming up and that she needed to work with and outside attorney named mark leach in order to accomplish that then where some communications between mr leach and ms lane mr leach was not reporting to be  an employee or so seeing any way with the insured in fact he was outside counsel also there were e mails there were phone calls and then subsequently to that ms lien received an e mail from m that contained directions to the bank we maintain that that was not a fraudulent instruction because mr leach was not reporting to be an employee of principal and likewise the first communication although it fell within the definition the third definition of a fraudulent instruction was not directing was not to did not direct the bank to do anything it was a communication to  work with outside counsel to effect the transfer when we have this second one the second communication which is from mr leach with the directions to the bank that contained very specific wire instructions even after that there are several intervening acts there are there is the logging into the website the account on the bank but then the bank freezes the funds and i think that's very significant because it was flagged by the bank's fraud fraud department at which point there were communications between the fraud officer at the bank and ms lane there was also another communication with mr leach at the bank's request ms lane reached out to mr leach in fact telephoned him or he telephoned her rather after she sent an email in order to satisfy the bank that the wire transfer was not fraudulent it was only then that the fraudulent transfer went through so as far as the first question that we believe is it issue in this case there was no fraudulent instruction as that fargo as well as by the company does that break it's just chain of being direct yes it does and the reason we say that it does is because a direct door all the cases that we've cited from the eleventh circuit in the income case the six circuit in the american tooling case the fifth circuit in the apache case the ninth circuit in both the past master and the taylor case they all say that their bit where in order transaction later on  by that fraudulent struction direction the bank and our position and i think it's clear that as one of the extra players our position is that there was not a fraudulent instruction directing the bank to transfer funds because the direction to the bank came through mr leech who was not impersonating a bappa want someone who was an employee of principle so our first position is that there was not befor instruction direct from the bank to transfer funds but then secondarily that even if there were are that these intervening acts broke that chain and i might point out the district court in its opinion said that the two scenarios that it's saw were intervening acts as the plaintiffs indicated or as we indicated there had to be a direct loss and so under the district court's own reasoning of the pla argument the intervening acts the court found that there was a fraud and there was loss and therefore causation and we think that that is a gross misinterpretation has yes but his whole thing from the start to the finish was what within two hours yes or no i mean that sounds reasonably direct as opposed to something that stretched over days and then i don't think it's a temporal i don't think that's a temporal issue because you could have a direct loss for example if the gave hypothetically gave wiring structures to ms lane and she handled it the next day would still have a direct loss by the same account especially with the way emails are these days with rapid communications on to the bank and had to transfer the funds without anything else i think that's what this policy covers and if that's what the american tooling facts are it's also what the meditative you're probably as a leech got involved is that it yes contemplated by this form zero zero four one and so they were going to create a new form zero one six seven they changed the creator a new definition a new new term called fr sorry for allegedly induced transfer and it defined it as a transfer resulting from an instruction i'm sorry a payment order made on the good faith for alliance of the instructions provided by a person impersonating an employee a customer vendor or owner of being insured so what the surety and fidelity association is saying is that we need to create a new definition in order to cover this new crime then when the court starts or when the syrian fidelity association says that we're going to remove this definition this third definition of fraudulent destruction because now it's absurd within the new term of fortunately induced transfer the issue that the plaintiff has brought up is really a red herring because what the language that they're talking about has to do with the first and the second definition zz of fraudulent instruction and that is because they removed the third and the third definition of for doing destruction from the form put that into this new form for fortunately induced transfer the last paragraph of the surety in fidelity association submission talks about the definition of a payment order and if you were to look at the actual form which is found in the record at document thirty nine dash two pages fourteen and fifteen in the district court record that language is for the remaining first two definitions of fraudulent instruction in order to tighten that up it has nothing at all to do with the third definition of instruct affords instruction that is i gather you agree though with the georgia law as the insured terms contract must be construed in accordance with the reasonable expectations of the insured is that no i don't me please the court your honors good morning i'm scott goddess on behalf of p s g the app ellie i'm joined by jim leonard my partner and also joe ventura who was a managing director of principle solutions group you owners consistent with apple in its appellants analysis of the case there are two key issues was there a fraudulent instruction as that term is defined within the insurance policy and did the last result directly from a fraudulent struct from the fraudulent destruction and so looking to the definition of fraud instruction aren't sure wrote in this contract of adhesion it talks about includes a computer telephone or other written or electronic instruction initially approval to actually admit that that e mail is a fraudulent instruction and the only real question is what we do about what leach did afterwards seem to me that that just supplemented the instruction that it already been made and flow directly from your honor we agree one hundred percent and consistent with that and as documents that are mentioned within appellants briefs in each message that comes from the fraudster to continue to persuade the mr leach told the controller quote to tell the bank that he had received the instructions verbal ie from the syrian via telephone that's their brief at twelve and so the suggestion that because the original e mail did not include wire instruction that is a point that's not included in the insurance policy in georgia law is clear that when you could have included more stringent language in the insurance policy you're not able to interpret the language that you actually wrote in the more stringent fashion and so there are cases out there for example the crown bank case which is pending in new jersey to talk about more stringent ways to interpret this and so all of these instructions i mean leach is really doing is providing the details  association said as industry is rolling out a new policy with language that they purport to have more explicit we cover this sort of loss and the reason that they needed that they explained is to quote avoid any misinterpretation and quote and avoid confusion as to whether quote it covers the same exposure and quote as new language is being sold so what they've told the public and insurance commissioners is that we want to cover social engineering fraud we need to get rid of the definition that's at issue in this case to avoid misinterpretation of the old language covers and they admit that instruction in the prior version could refer to either an instruction received from some party to be insured or instruction sent by the insurer to the bank to wire funds a suggestion that this language could be read in more than one way which one reliever says mercury insurance and st paul versus f d i c is an admission that the language is in big was because it can be read in more than one way then the question becomes was there last resulting directly from this fraudulent struction whether it be from the original email or from the messages from mr leach which completely continue the scheme and at the direction mr nazarian and the answer yes for three points first its immediate it took place about probably within about an hour about the same amount of time that we arrived at this court about the time that i'm speaking the money was gone between nine ten am and mean and they looked at the concepts of immediacy and without interruption and they held for purposes of that policy one thing results directly from another that follows straight away immediately without intervention or interruption the facts for income however were completely different from those that are here there are twenty five thousand five hundred fifty three transactions that took place over seven months and the court explained it was a four step process the first one was the initial computer fraud the second step was the sending money to an intermediary third party in com argued that it's lost took place at step number two the court said no it did not there had to be a third step fraudulent charge the debit cards and in the final and forced up on the money was actually gone is when the lost in com occurred and the court explained that step four quote was tempore really remote days or weeks even months or years quote between that fraudulent transaction and when the last took place and indeed the court explain that in com had three years later over a million dollars in it's an account because i was able to stop some of these transactions and it rejected th at the money was gone at step two this is completely different this is a two step process fraudulent instructions step one satisfying that definite in step two the money is gone the money is wired there's no chance to get it back consistent with that is the published decision for american tooling from the sixty look at that came out this year american tooling involved another business email compromise and spoofing scituate in which the  leaves starting on march twenty seven twenty fifteen and then there were multiple wires sent all the way through may eight twenty fifteen unlike the two hour window that was at issue here the sixth circuit explain that there was a quote chain of events and quote to actually send the wires there were multiple e mails that were received it was decision from a vice president determining whether the vendor had actually satisfied the work or the vice president had to determine which invoices to pay then had to sign into the banking portal enter the information and then someone else had to approve the wire notwithstanding the quote chain of events the american tooling panel explained that american tooling had quote suffered its loss immediately after the transfer and they also explained how that case was different from income walking through it they explained that in income there was a four step process or as an american tooling they were to step data there was an original email saying send money you'll hear from our attorney who will contact you and the fake attorney did indeed contact the company the fraudster actually had to take things a step further and meditate because the internal employee was not allowed to wire the funds without further approval and so the fraudster sent more e mails around the company to other people and said you'll be hearing from the original employee posing as another employee please work with her to wire the funds  and so the insurance carrier made the exact arguments that i am sure has made here as the trial court explained in meditating according to federal federal insurance the insurance carrier the spoof e mails quote did not create authorize or release a wire transfer and quote because metadata employees received telephone calls from the thief and took other steps in approving the fraud transfer notwithstanding that the district court said that it's covered under fraudulent transfer coverage it's covered under for computer fraud coverage the second circuit up held on computer fraud so we need not address fraudulent transfer coverages one set of cards one series of coverage is enough and it's and while it's true the second circuit was true that meditate employees themselves had to take action to effectuate the transfer we do not see their actions as sufficient to sever the causal relation between the spoofing attack and losses incurred the employees of this court has recognized the employees were acting they believe the behest of a high ranking member of metadata what an employee actually can do indirect loss is defined as a bookkeeping loss or unrealized income of you expected to get money you did not indirect losses also can't count considered to be damages to third parties or third party liability that's consistent with conceptually what the sixth circuit said in the earlier tooling manufacturing decision in which you walk through the historical analysis of how direct vs indirect and loss result  directly came about where they recognize that loss resulting directly was an effort by the insurance industry to avoid covering third party liability and so i'm sure wrote that right into the policy the third thing that's interact is whether there were mistake due to fraud i'm just curious by the way was this part of the normal course of business of principal i mean you know just you get an e mail from the boss allegedly you know fraudulent saying i signed the millions of undoing chinese banking you're going to get a call from a lawyer you don't know who will carry out in the give you the wire and structure this book you personally and think oh this is just normal well misleading acted and she was being a good employee i submit in that she was acting she hadn't recognized that the e mail was being spoofed certainly not they don't they were not in the process of expanding quite often they were a startup company they were a fast growing company in the state of georgia run by two managing directors one of whom is here today and as they were doing their business it was not a big corporate environment as you might expect and so for situations like that where somebody makes a mistake somebody is defrauded somebody is duped that's exactly why one buys insurance and these things happen it's unfortunate that they did it we would all be happier if the money had not been sent there's a market for the insurance agree one hundred percent your honor and that's that's what the policy was designed to do and so the last point in terms of the policy language is that section four d is an exclusion and has an exception and we're not trying to create coverage be an exception to exclusion what this policy language demonstrates is that our ensure intice apptit then employees and bank would act upon fraud they said we won't cover losses from an employer or a bank quote acting acting upon any any instructions and quote to transfer pay money when that instruction actually turn out to be fraudulent except under a dot six dot a dot to be exact provision that we're dealing with here and so the policy recognizes that employees can beat that a bank can be duped and they can take action upon and so now consistent with that we submit that because they did there is coverage it's recognized in our insurers position  the last decision we know needs were all decisions that came down after the briefing was the big networks to sit again this is forty six million dollars wired to foreign bank accounts demonstrating the importance of this and the same arguments arose there as well the carrier said it's not it's not direct the carrier said well there were a message from an attorney and so therefore that's not a fraudulent struction and in rejecting the demur the california state court judge said that ultimately that's not accurate message and the directions and everything else was at the direction of us in this area and at the last which took place in two hours and ten minutes on a wednesday morning did indeed results regularly under both the policy language how the income are i wanted to clarify that i think it's clear but again it will make sure the first communication the first e mail we admit was a forgery instruction however we do not admit and do not believe that it was a fraudulent instruction and fell within the granta coverage because of the grant of coverage is for a fraudulent instruction directing  to that point i thought you were changing think not now the second in other words the second e mail that had come from someone reporting or impersonating mr nazeri and then the question would be soley whether or not it was a lost cause directly by that i wanted to point out also that the the exclusion that mr goddess referred to it says that it does not cover acts by employees acting upon an instruction that proves to be fraudulent and then it says except for a six a two but also says a six b and that's that's important because those are the only places where the fraudulent instruction in quotations a defined term is used and so in those situations where there's an instruction that turns out to be fraudulent what the exclusion is making clear is that in those cases the the exclusion would not apply and that is significant that it mentions both of them for this reason and that is that the grant to coverage under a six b which is for computer fraud is broader it says that it covers computer fraud based on an employee quote acting in good faith upon a quote fraudulent instruction close quote you don't have that in the funds transfer fraud grant to cover so that we have here the word loss resulting directly those three words have meaning particularly the word directly if there is something that is foreseeable if it intervening event such as the bank questioning is foreseeable we might have a proximate cause but i want to point out that the past master case talks about it being an inevitable the american tooling case talks about it being a point of no return there is no case your honour's that says that they found direct loss on these facts the metadata case the american tool in case all those involved  policy covers even if they were intervening events between the fraud and the loss and i think that is categorically against the case law so there's other things i would say but i would rely on my belief thank you