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Interactive Communs. Int'l, Inc. v. Great Am. Ins. Co.

United States Court of Appeals for the Eleventh Circuit

May 10, 2018, Decided

No. 17-11712

Opinion

 [*930]  PER CURIAM:

This insurance-coverage case arises out of a "Computer Fraud" policy issued by Great American Insurance Company to Interactive Communications International, Inc. and HI Technology Corp. (together, "InComm"). InComm sells "chits"—each of which has a specific monetary value—to consumers, who can then "redeem" them by loading their value onto a debit card. InComm lost a lot of money—$11.4 million—when fraudsters manipulated a glitch in InComm's computerized interactive-telephone system that enabled them to redeem chits multiple times, with each duplicative redemption [**2]  of an already-redeemed chit defrauding InComm of the chit's value. We hold, though, that InComm's insurance policy does not cover its loss. Although the fraudsters did "use [a] computer" within the meaning of the policy, we conclude that InComm's loss did not "result[] directly" from the computer fraud, as required by the policy's plain language.

InComm operates a network that allows consumers to put money onto general-purpose reloadable debit cards issued by banks. In particular, InComm sells "chits" to consumers, which they can then use to transfer funds to their cards. After purchasing a chit at a retailer like CVS or Walgreens, a consumer can simply call InComm to redeem the chit and have its value moved over to his card.

When a consumer dials InComm's 1-800 number to redeem a chit, he is connected to InComm's interactive voice response ("IVR") computer system. The IVR system uses eight computers that process voice requests or telephone touch-tone codes. To redeem a chit through InComm's IVR, a consumer enters his debit card number and the PIN located on the back of the chit. The IVR then credits the value of the chit to the card, and the funds become immediately available to the [**3]  cardholder.

After making the funds available for use, InComm is contractually obligated to transfer money, equivalent to the value of the redeemed chit(s), to the bank that issued the debit card. By contract, InComm is obligated to transfer the funds  [*931]  within 15 days, although as a matter of standard practice, InComm typically does so within 24 hours. The funds are maintained in the card-issuing bank, for the cardholder's benefit, until he uses the card to conduct a transaction. Because InComm's computer system immediately credits the value of a redeemed chit to a debit card, a cardholder could make purchases using a debit card before or after funds sufficient to cover the value of the redeemed chit are transferred from InComm to the card-issuing bank.

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731 Fed. Appx. 929 *; 2018 U.S. App. LEXIS 12410 **; 2018 WL 2149769

INTERACTIVE COMMUNICATIONS INTERNATIONAL, INC. et al., Plaintiff-Appellants, versus GREAT AMERICAN INSURANCE CO., Defendant-Appellee.

Notice: PLEASE REFER TO FEDERAL RULES OF APPELLATE PROCEDURE RULE 32.1 GOVERNING THE CITATION TO UNPUBLISHED OPINIONS.

Prior History:  [**1] Appeal from the United States District Court for the Northern District of Georgia. D.C. Docket No. 1:15-cv-02671-WSD.

InComm Holdings Inc. v. Great Am. Ins. Co., 2017 U.S. Dist. LEXIS 38132 (N.D. Ga., Mar. 16, 2017)

Disposition: AFFIRMED.

CORE TERMS

chit, funds, debit card, fraudulently, redeemed, redemptions, Dictionary, fraudsters, cardholder, computer system, duplicate, transferred, consumers, computer fraud, district court, manipulation, purchases, card, proximate cause, obligated, merchant, premises, use of a computer, intervening, telephone, phones

Contracts Law, Contract Interpretation, Insurance Law, Claim, Contract & Practice Issues, Policy Interpretation, Ordinary & Usual Meanings, Civil Procedure, Appeals, Reviewability of Lower Court Decisions, Preservation for Review