Insurance for Fraudulent Wire Instructions

Fraudulent or faulty wire instructions from cyber criminals are affecting title professionals and closing agents across the United States. Here are two scenarios to consider:

  • A title agent receives revised closing instructions from the seller/seller’s representative. The title company verifies the new closing instructions/wire routing numbers and wires the funds. A few days later, upon the buyer calling to ask where the money is for closing, it is discovered that the new wire instructions were fraudulent and the wired money is gone.
  • The buyer of a house receives an email from a representative at their title/closing agency, giving them wiring instructions for their down payment. They wire the money per the instructions. When they eventually meet with the title agency, they find their money never arrived. The email they received containing wire instructions was fraudulent and the money is gone. The title company’s email had been hacked by cyber criminals.

Insurance is available to protect the title agency/closing agent, but getting it is not as simple as adding a “wire fraud” endorsement to your policy. Here is what you need to do:

  • Have a written, company-wide practice of verifying all wire instructions and revisions by phone. This includes reading the account number of the new wire and receiving verbal verification. This verification process is a warranty for most wire fraud policies, meaning that if you don’t do it, there will be no coverage.
  • Purchase both Fidelity/Crime coverage and Cyber insurance coverage, and have a Wire Fraud endorsement coverage added to one (but not the other) insurance policy. Having duplicate coverage can sometimes void both coverages and will almost certainly make the claim process more complicated.
  • Most of the time, the Wire Fraud coverage is a sublimit of the Crime or Cyber policy. This means that even if you have a $1,000,000 policy, only $100,000 or $250,000 is available for a fraudulent wire instructions claim.
  • To have the potential for coverage in the second scenario, where the title company’s email is hacked, proper Cyber coverage must be purchased. While each Cyber policy is worded differently, typically you need a policy that provides “Third Party Liability,” meaning that claims by clients or other third parties have coverage.
  • Work with an insurance broker/agent who is experienced in working with title agents. Each Cyber and Fidelity insurance policy is a little bit different—and some offer very little coverage. An experienced broker will help you get the coverage that is right for you.

Are you concerned you might not have the correct coverage? Do you want some feedback on how you presently handle prevention of being duped by fraudulent wire transfers? Call or email to speak with one of our title agent experts. Merriam has supported the insurance needs of the title industry for over 25 years.

Insurance for Fraudulent Wire Instructions

James Dick, CPCU, AAI