(Article from Insurance Law Alert, July/August 2025)
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Holding
A Nebraska district court denied an insurer’s motion to dismiss a coverage claim, finding that a “loss” provision in the policy was ambiguous and that exclusions did not bar coverage as a matter of law. Panorama Point Partners, LLC v. Everest Nat’l Ins. Co., No. 8:24CV393 (D. Neb. June 20, 2025).
Background
Panorama, a private equity investment fund management company, entered into negotiations with an entity that it believed to be a Swiss-based investment group. The investors pledged a $50 million investment, contingent upon Panorama creating a “good faith reserve” of $2.83 million. To fund the reserve, Panorama borrowed $3 million from Access Bank.
Panorama also obtained a private equity insurance policy from Everest. The policy covered losses for both “Wrongful Acts” and “Security Wrongful Acts.” “Wrongful Act” was defined as any “actual or alleged act, failure to act, error, omission, misstatement, misleading statement, neglect or breach of duty by an Insured Person,” as well as any “Security Wrongful Act.” Separately, a “Security Wrongful Act,” was defined as “any actual or alleged act, error, omission, neglect or breach of duty by an Insured that results in a System Breach, Denial of Service Attack or Privacy Event.”
Panorama initially put the loan funds in a secure cryptocurrency account, but at the urging of the investors, moved the funds to an unsecured blockchain account. Within seconds of the transfer to the unsecured account, the purported Swiss investors hacked the account and stole the $2.83 million.
When Access Bank learned of the incident, it demanded that Panorama recover the lost funds. Thereafter, Panorama filed a claim with Everest, which denied coverage. Panorama filed suit and Everest moved to dismiss. The court denied the motion.
Decision
The policy defined “loss” to exclude “any amount that represents . . . any actual or alleged funding obligations . . . or monies paid . . . as a result of any actual or proposed equity purchase, equity investment or equity contribution, acquisition, or loan or extension of credit.” Everest contended that the loss at issue was a loan and therefore excluded from coverage. The court concluded that this provision was ambiguous, reasoning that the language was unclear as to whether it excluded only equity-related funding obligations (as contended by Panorama) or all loans.
Everest also argued that the bank’s letter did not constitute a covered “loss” for a “Wrongful Act” or “Wrongful Security Act” as required by the policy, but instead merely sought repayment of a loan. Rejecting Everest’s construction, the court reasoned that the bank’s letter was more expansive than a simple loan repayment request and included references to the cyber theft and alleged misrepresentations by Panorama in obtaining the loan. The court stated: “While its primary purpose was seeking for Panorama to recover the lost funds, it also explains the potential wrongful acts which necessitated the recovery of funds. It would be myopic to read the Bank’s letter as merely seeking loan repayment when the theft of the funds was the precipitating event.” The court therefore concluded that the demand letter triggered coverage for a Wrongful Act and/or a Wrongful Security Act under the relevant policy provisions.
The court also rejected Everest’s assertion that coverage was barred by a cyber theft exclusion, which applied to claims “based upon, arising out of, or is attributable to the loss, transfer [or] theft of monies, securities or tangible property in the care, custody or control of the Insured,” among other things. The court explained that the heading to this exclusion stated that it applied exclusively with respect to coverage for a Security Wrongful Act. Therefore, even if the exclusion applied, Panorama could obtain coverage for a Wrongful Act.
Comments
Because the court was ruling on a motion to dismiss, the availability of coverage under Everest’s policy remains unsettled. The court noted that the factfinder must consider extrinsic evidence relating to the ambiguity of the “loss” provision. Such evidence may result in a finding of no coverage. Similarly, development of the factual record may lead to a ruling that coverage is barred by the exclusionary clauses.