News Summary
Texas Gulf Bank is taking legal action against its insurers for denying coverage related to significant losses from a cyber fraud incident. The lawsuit aims to recover approximately $1.5 million lost due to unauthorized wire transfers, which resulted from a breach involving a client, Sequeira Civil Construction. The bank claims the insurers misapplied policy exclusions and is seeking substantial damages and attorney fees. As cyber threats increase, this case may set important precedents for cyber insurance policies and financial institutions.
Texas Gulf Bank Takes Legal Action Against Insurers Over Cyber Fraud Losses
Texas Gulf Bank, N.A. has filed a lawsuit against its insurance providers in the US District Court for the Southern District of Texas, seeking to recover approximately $1.5 million in losses stemming from a recent cyber fraud incident. This legal action draws attention to the complexities of cyber insurance and the responsibilities expected from providers.
The Heart of the Dispute
The conflict began after a cybersecurity breach involving Sequeira Civil Construction, LLC (SC2), a client of Texas Gulf Bank. In October 2023, SC2 initiated legal action against the bank, claiming unauthorized wire transfers were executed from its account, violating the terms of their Wire Transfer Agreement. The issue arose when a cybercriminal gained access to the email account of SC2 employee Beth Behenna, initiating fraudulent wire transfer requests on August 3, 2023.
Texas Gulf Bank mistakenly contacted a number provided in the fraudulent emails instead of the official contact outlined in their agreement, resulting in a series of unauthorized transfers. Although the bank was eventually able to recover $297,400 of the lost funds, approximately $1,481,540 remained unrecoverable.
Legal Fallout
On September 11, 2023, SC2 escalated matters by demanding Texas Gulf Bank reimburse the unrecovered funds. This legal confrontation was settled in May 2025, with the bank agreeing to a payout of $787,500 to SC2.
Subsequently, Texas Gulf Bank informed their insurance companies, including Great American Security Insurance Company, of SC2’s claim based on their cyber policy. However, on October 12, 2023, ABA Insurance Services, representing Great American Security, denied coverage, citing a “Non-Company Security Breach Exclusion.” The insurers claimed they were not liable for breaches that did not involve their own computer systems, leading to significant frustration for Texas Gulf Bank, which believed this exclusion was misinterpreted.
What’s at Stake?
This lawsuit raises critical issues surrounding cyber insurance policies and the responsibilities they entail. Texas Gulf Bank contends that the bond issued by Great American Alliance Insurance Company did not require adherence to a “Predetermined Telephone Number” in the written agreement, suggesting that the denial of coverage was unwarranted.
The bank further accuses the insurance companies of breaching contracts and acting in bad faith. They assert that the insurers failed to conduct comprehensive investigations and did not follow the regulations set out by Texas insurance statutes. Texas Gulf Bank is seeking at least $1.2 million in damages, along with attorney’s fees of no less than $50,000.
The Bigger Picture
The case highlights the broader implications regarding the extent of policy exclusions when cybercriminals exploit vulnerabilities that are unrelated to the insured’s systems. It also raises questions about what is considered adequate verification procedures under financial institution bonds.
The outcome of this legal dispute may influence not just Texas Gulf Bank and its insurers, but also other financial institutions facing an increasing number of sophisticated cyber threats. This case could shape how insurers and their clients approach coverage for cyber risk and financial fraud moving forward.
Final Thoughts
As the financial landscape continues to evolve, businesses must become increasingly aware of the nuances within their insurance policies. The ongoing lawsuit by Texas Gulf Bank will be closely observed by the financial community, as it underscores the importance of understanding the implications of cyber insurance in today’s digital world.
Deeper Dive: News & Info About This Topic
- Insurance Business
- Wikipedia: Cyber Insurance
- KHOU
- Google Search: Texas Gulf Bank lawsuit
- Times of India
- Google Scholar: Cyber Fraud Insurance Claims
- Houston Chronicle
- Encyclopedia Britannica: Cybersecurity
- KNUE
- Google News: Texas Gulf Bank cyber fraud
Author: STAFF HERE AUSTIN WRITER
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