Case Explained: OFFICE OF THE SPECIAL DEPUTY RECEIVER v. HARTFORD FIRE INSURANCE COMPANY

Court: United States Court of Appeals for the Seventh Circuit Filed: 2026-06-18 The Seventh Circuit affirmed the district court’s dismissal of the Office of the Special Deputy Receiver’s (OSD) breach of contract and declaratory judgment claims against Hartford Fire Insurance Company. The court held that the insurance policy unambiguously excluded coverage for the loss suffered when hackers, having compromised the CFO’s email account, sent fraudulent transfer instructions to other OSD employees via email. The court applied Illinois law governing contract interpretation, which mandates enforcing policy terms as written if they are unambiguous and not subject to more than one reasonable interpretation. Under Federal Rule of Civil Procedure 12(b)(6), the court reviewed the dismissal de novo, accepting OSD’s factual allegations as true but concluding that the specific language of Rider 17 controlled the outcome. The exclusion provision in Rider 17 barred coverage for losses resulting from fraudulent instructions sent to OSD through electronic mail, without limiting the exclusion to messages originating from outside the organization. The court rejected OSD’s arguments that the exclusion should be read narrowly to apply only to external senders or that a conflict existed between this exclusion and the affirmative computer systems fraud coverage in Rider 13. The court found no ambiguity because the exclusion did not render Rider 13’s coverage illusory; it merely carved out specific instances of email-based fraud from the broader policy. As a practical consequence, OSD is barred from recovering the nearly $4 million loss under the Hartford bond, and the district court’s judgment in favor of Hartford stands. Do It For The Case Law is a news reporting service. Nothing in this episode constitutes legal advice.