Areeba Rashid

Crypto Theft Claim Denied: Court Rules No Insurance For Digital Losses

Crypto Insurance Claim, Crypto News, Crypto Scam, Crypto Theft

Crypto
  • U.S. court rules that cryptocurrency loss isn’t covered under home insurance as it lacks “direct physical loss.”
  • Lemonade Insurance denies $170,000 crypto claim, paying only $500 for unauthorized electronic transfer.
  • The ruling highlights legal challenges of treating digital assets as physical property in insurance policies.

A U.S. appeals court has ruled against a homeowner who attempted to use his home insurance to get back $170,000 lost in a cryptocurrency fraud. On October 24 this year, the Fourth Circuit Court of Appeals stated the loss did not involve the “direct physical loss” which is necessary for anyone to get a claim under his or her homeowner’s insurance.

Lemonade Insurance was deemed liable for the loss of cryptocurrency of the homeowner, Ali Sedaghatpour in December 2021. Sedaghatpour said that the $170,000 in crypto he invested in the fraudulent investment scheme, APYHarvest, should be regarded as personal property in his insurance policy that offered up to $160,000 for such losses.

Court Defines Crypto Loss Limits

Nevertheless, the district and appeals courts held that the policy exclude intangible assets such as digital currencies. The appellate judges were in support of the lower court’s ruling holding that under Virginia law “direct physical loss” means tangible harm or destruction, which doesn’t extend to virtual items like digital currencies.

Lemonade Insurance had already paid Sedaghatpour $500 for losses due to unauthorized electronic transfer under another part of the policy. The insurer explained that while the wallets are tangible and can be considered property themselves, cryptocurrencies cannot be considered tangible property that can be insured.

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Source: Court Ruling

The case was initiated in March 2022 when Sedaghatpour understood that the wallet key given by APYHarvest was fake. The company, which has been named and shamed as a scam firm by the Central Bank of Ireland, cleaned him out and he turned to his insurer.

Crypto’s Role in Insurance

Although Sedaghatpour tried to overturn the dismissal of his case, his claim that digital currencies should be considered as personal property in home insurance was denied. This decision raises the legal issues of applying the physical property concept to digital assets in the insurance industry.

According to a report, Neither Sedaghatpour nor Lemonade Insurance’s legal representatives could be reached for comment following the ruling. This case highlights the increased difficulty in understanding how cryptocurrency is recognized within the legal and insurance sector especially in relation to personal wealth built from digital currencies.

Areeba Rashid

Areeba Rashid