Tuesday, September 15, 2015
NPR this morning has a story entitled "When Cyber Fraud Hits Businesses, Banks May Not Offer Protection." It describes some instances in which small businesses that had their bank accounts drained by cyber fraud were unpleasantly surprised to find that their banks were not legally obligated to reimburse them (unlike in most cases for bank accounts owned by individuals).
The story of one company contradicted the frequent assertion by defendants that defendants in civil suits are often "forced to settle" because the costs of defense exceed the claim. One of the victimized businesses found its checking account down by $545,000 due to cyber fraud:
[The owner of the construction company involved] thought his bank . . . would reimburse him. It refused, and he sued. [The owner] says the bank threw a huge amount of resources at the case. He says he discovered in mediation that the bank had spent "in excess of $1.2 million fighting this, when we offered to settle this for $200,000."
[The construction company] lost the first round but won on appeal when a panel of judges concluded [the bank's] security had not been commercially reasonable.
Another small business lost $14,000 due to cyber fraud, and its owner "considered suing [his bank], but was advised he'd spend much more on legal fees than he'd recover."