NO COVERAGE FOR THEFT OF CRYPTOCURRENCY

In Burt v. Travelers Commercial Insurance Co., No. 22-CV-03157-JSC, 621 F.Supp.3d 1049 (N.D. Cal. Aug. 16, 2022), the District Court held that the insured’s homeowner policy did not provide coverage for the theft of digital currency.  The theft of cryptocurrency from an insured’s “digital wallet” was not a “direct physical loss” to the insured’s personal property.  Therefore, it was not covered under the homeowner policy.  In this case, plaintiffs had inherited various cryptocurrencies from their father.  The currencies were held in an electronic wallet in their father’s coin base account.  The theft occurred while the father’s homeowners policy was in force.  Hackers took control of the coin base account and transferred the digital currencies to themselves.  The Court found that the loss of cryptocurrency in a digital wallet could not, as a matter of law, constitute a direct physical loss.