Apache Corporation v. Great American Insurance Co.
662 F. App'x 252
| 5th Cir. | 2016Background
- Texas-law diversity action arising from Apache’s loss after criminals used email to alter Petrofac’s payment information.
- Criminal scheme followed an initial phone directive and a fraudulent email with a Petrofac letterhead attachment.
- Apache approved and initiated payment to a fraudulent account, believing it was paying Petrofac invoices.
- GAIC denied coverage under the Computer Fraud provision; Apache sued for coverage and statutory penalties in Texas federal court.
- District court granted Apache summary judgment on coverage and denied penalties; the court later vacated and Apache appealed.
- Court’s Erie-guess considers whether the loss resulted directly from the use of a computer to fraudulently cause a transfer.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the plain meaning of the computer-fraud provision cover this loss? | Apache: email use invokes coverage under plain language. | GAIC: no direct computer-caused transfer; loss stems from multi-step process. | Not covered; loss not a direct computer-caused transfer. |
| Should Texas uniformity and contract-interpretation rules govern the Erie-guess here? | Apache: uniform cross-jurisdictional interpretation favors insured. | GAIC: Texas should constrain coverage aligning with similar authorities. | Uniform interpretation favors GAIC; language not extended beyond direct computer transfer. |
| Does extending coverage to email-based schemes convert the policy into a general-fraud policy? | Apache: not necessary; email is the computer-related trigger. | GAIC: would broaden coverage beyond intended risk category. | Avoid expansion; interpretation not to cover email-only steps unless directly computer-caused transfer. |
Key Cases Cited
- McGinnes Indus. Maint. Corp. v. Phoenix Ins. Co., 477 S.W.3d 786 (Tex. 2015) (uniformity for identical insurance provisions across jurisdictions)
- RSUI Indem. Co. v. Lynd Co., 466 S.W.3d 113 (Tex. 2015) (ambiguity resolved in favor of insured; contract interpretation framework)
- Schaefer v. Amer. Mfrs. Mut. Ins. Co., 124 S.W.3d 154 (Tex. 2003) (ambiguity and contract-interpretation approach for insurance provisions)