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A Delaware credit union sued its insurance company for denying payment of $714,850 in losses from ITM jackpotting attacks and HELOC thefts, according to a recent civil complaint.
The $730 million Del-One Federal Credit Union in Dover, Del., filed a lawsuit last week in U.S. District Court in Wilmington against TruStage (formerly Cumis Insurance Society) in Madison, Wis.
Between Sept. 22 and Sept. 28, 2024, criminals breached multiple ITMs and installed a Raspberry Pi device that intercepted communications between the ITMs and Del-One’s network. The device manipulated the machines to dispense cash without linking transactions to member accounts.
The thieves stole $462,800, but the losses were not discovered until late December, according to the credit union lawsuit.
In addition, from Feb. 20 to March 25, 2025, Del-One uncovered a counterfeit check scheme that targeted members’ home equity line of credit accounts, causing an additional loss of $252,050.
Del-One argued both incidents are covered under its fidelity bond and is seeking compensatory and punitive damages, along with legal fees, the lawsuit stated.
In its response to Del-One’s lawsuit, TruStage argued all withdrawals from the credit union’s ITMs were effected with a personal ID number and a plastic card. This meant the purported losses are subject to the fidelity bond’s plastic care/PIN exclusion under which the insurance company is not obligated to pay for any losses, according to TruStage’s legal filing.
TruStage also contended there is no bond coverage for the HELOC theft because the checks were not counterfeit. The fidelity bond defines counterfeit as an imitation, which is intended to deceive and to be taken as an original. TruStage claimed the checks that were drawn on the members’ HELOC account were not imitation of original checks.
“Moreover, there was no coverage here because the funds involved were not obtained from a member's share draft or checking accounts, but were rather drawn against the members’ respective HELOCS,” TruStage stated in its court filing.
Peter Strozniak can be reached at pstrozniak@cutimes.com.
This article was originally published by Credit Union Times and may not be reprinted.
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