In a latest Fourth Circuit Court docket of Appeals resolution that leaves me scratching my head, Lemonade Insurance coverage Firm efficiently argued that cryptocurrency isn’t lined beneath their home-owner’s coverage as a result of it’s not “tangible property.” 1 The irony is {that a} tech-forward insurance coverage firm named after a refreshing drink takes such a bitter place on digital property. I give their artistic and profitable attorneys a toast—however they solely beat a professional se policyholder who didn’t convey to the courtroom’s consideration that different insurance coverage firms are issuing property insurance coverage insurance policies for bitcoins, blockchain, stablecoins and different types of digital and cryptocurrency.
The Outdated Guard Leads the Manner
In the meantime, throughout the pond, the venerable Lloyd’s of London – an establishment that started guaranteeing wood ships within the 1600s – has embraced the digital age. Lloyd’s syndicates, together with Atrium and TMK, now supply complete property insurance coverage protection for cryptocurrency theft, together with safety for each cold and warm wallets. These insurance policies even characteristic dynamic limits that modify with cryptocurrency worth fluctuations, displaying outstanding adaptability for an establishment that predates electrical energy. Clearly, had this reality been dropped at the eye of the federal judges, they might not have written that these digital currencies are usually not tangible property since Lloyds is issuing protection for these beneath property insurance coverage insurance policies!
The Candy and Bitter of Insurance coverage Innovation—The Distinction is Placing
Lloyd’s, with its centuries-old custom of quill pens and maritime insurance coverage, acknowledges the truth of digital property as property worthy of safety. In the meantime, Lemonade, a startup digitech American firm that prides itself on Synthetic Intelligence to make claims determinations and digital underwriting automation, allowed its intelligent insurance coverage attorneys to persuade a federal district courtroom choose and the Fourth Circuit Court docket of Appeals that when somebody steals your Bitcoin, it’s probably not a “direct bodily loss” as a result of you may’t contact it.
I recommend that the Covid case legislation denying protection is now wrongly overreaching into normal arguments in opposition to property harm protection circumstances by limiting what “tangible property” consists of and what “bodily loss” means within the context of circumstances exterior of Covid-related losses. This must cease, and this case is an instance of why.
A Bitter Style for Policyholders
The Fourth Circuit’s resolution in Sedaghatpour v. Lemonade Insurance coverage Firm, affirming a flawed district courtroom opinion, 2 represents a regarding precedent for cryptocurrency holders. The courtroom and Lemonade could have correctly restricted protection to a measly $500 beneath an digital fund switch provision. The wrongful a part of the choice is that billions in digital property stay doubtlessly unprotected beneath conventional property insurance coverage insurance policies, discovering that bitcoins and different types of digital forex are usually not tangible property or property.
Maybe it’s time for American insurers to take a web page from Lloyd’s playbook and acknowledge that property within the twenty first century isn’t restricted to issues you may drop in your foot. Till then, cryptocurrency house owners would possibly wish to look throughout the Atlantic for his or her insurance coverage wants – the place, apparently, the “outdated canine” are higher at studying new methods.
One lesson for policyholders and their counsel is to grasp the insurance coverage product and get your heads out of insurance coverage case legislation. Judges are usually not realized insurance coverage brokers or property claims adjusters. My outdated pal, the late Gene Anderson of the wonderful Anderson Kil policyholder agency, all the time stated that “a health care provider doesn’t discover ways to apply medication from studying medical malpractice books. Why ought to an insurance coverage lawyer be taught insurance coverage from merely studying insurance coverage case legislation?” These phrases are very true given the plain wrongful conclusion by the Fourth Circuit affirming the district courtroom’s resolution that cryptocurrency will not be “tangible property.” That argument is solely not acknowledged within the property insurance coverage market.
Keep in mind, when insurance coverage firms attempt to squeeze their method out of protection, generally you’ll want to make lemonade out of their lemons. Simply don’t anticipate Lemonade Insurance coverage to cowl it if somebody steals your digital recipe or cash.
Thought For The Day
Innovation distinguishes between a pacesetter and a follower.
—Steve Jobs
1 Sedaghatpour v. Lemonade Ins. Co., No. 23-1237 (4th Cir. Oct. 24, 2024).
2 Sedaghatpour v. Lemonade Ins. Co., No. 1:22-cv-355 (E.D. Vir. Feb. 6, 2023).
