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Universal Am. Corp. v National Union Fire Ins. Co. of Pittsburgh, PA.

Court of Appeals of New York

May 7, 2015, Argued; June 25, 2015, Decided

No. 95


 [**79]  [*678]  [***22]    Rivera, J.

On this appeal we consider whether an insuring agreement for computer systems fraud that applies to "a fraudulent entry . . . of Electronic Data or Computer Program" encompasses losses caused by an authorized user's submission of fraudulent information into the insured's computer system. We conclude that the agreement is unambiguous and "fraudulent entry" refers   to unauthorized access into plaintiff's computer system, and not to content submitted by authorized users. Therefore, we affirm the order of the Appellate Division.

Plaintiff, Universal American Corp. (Universal), is a health insurance company that offers, as relevant to this appeal, a choice of federal government-regulated alternatives to Medicare, known as "Medicare Advantage Private Fee-For-Service" plans (Medicare Advantage).1 These plans allow Medicare-eligible individuals to purchase health insurance from private insurance companies, and those companies are, in turn, eventually reimbursed [****2]  by the U.S. Department of Health & Human Services' Centers for Medicare & Medicaid Services for health care services provided to the plans' members. Universal has a computerized billing system that allows health care providers to submit claims directly to the system. According to Universal, the great majority of claims submitted are processed, approved, and paid automatically, without manual review.

The matter before us involves Universal's demand for indemnification to cover losses resulting from health care claims for unprovided services, paid through Universal's computer system. At issue is the coverage available to Universal pursuant to rider No. 3 (rider) of a financial institution bond (bond), issued by defendant National Union Fire Insurance Company of Pittsburgh, Pa. (National Union). The bond insured Universal against various losses, inclusive of certain losses resulting from dishonest and fraudulent acts. The rider amended the bond to provide indemnification specifically [****3]  for computer systems fraud, and states, in part:


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25 N.Y.3d 675 *; 37 N.E.3d 78 **; 16 N.Y.S.3d 21 ***; 2015 N.Y. LEXIS 1434 ****; 2015 NY Slip Op 05516

 [1]  Universal American Corp., Appellant, v National Union Fire Insurance Company of Pittsburgh, Pa., Respondent.

Prior History: Appeal, by permission of the Court of Appeals, from an order of the Appellate Division of the Supreme Court in the First Judicial Department, entered October 1, 2013. The Appellate Division modified, on the law, an order of the Supreme Court, New York County (O. Peter Sherwood, J.; op 38 Misc 3d 859, 959 NYS2d 849 [2013]), which had denied plaintiff's motion for partial summary judgment and granted defendant's cross motion for summary judgment dismissing the complaint. The modification consisted of declaring that the insurance policy does not provide coverage for the claimed loss. The Appellate Division affirmed the order as modified.

Universal Am. Corp. v National Union Fire Ins. Co. of Pittsburgh, PA., 110 AD3d 434, 972 NYS2d 241, 2013 N.Y. App. Div. LEXIS 6278 (N.Y. App. Div. 1st Dep't, 2013), affirmed.

Disposition: Order affirmed, with costs.


fraudulent, rider, computer system, losses, electronic data, coverage, computer program, ambiguous, insured, parties, users, computer fraud, unauthorized

Public Health & Welfare Law, Social Security, Medicare, General Overview, Contracts Law, Contract Interpretation, Insurance Law, Claim, Contract & Practice Issues, Policy Interpretation, Entire Contract, Ambiguous Terms, Ordinary & Usual Meanings, Ambiguities & Contra Proferentem, Reasonable Expectations