🌋 Court Says Crypto Isn’t Physical Property – Here’s Why
posted 25 Oct 2024
The U.S. Court of Appeals dismissed Ali Sedaghatpour’s case against Lemonade Insurance, where he had sought compensation after falling victim to a crypto scam. Sedaghatpour claimed the insurer wrongfully refused to cover his substantial cryptocurrency loss.
The lawsuit originated in 2022, when Sedaghatpour took legal action against Lemonade Insurance, claiming he was scammed by the investment company APYHarvest.
The scammers managed to access Sedaghatpour’s hardware wallet, stealing $170,000 worth of cryptocurrency. He asserted that his wallet was safely kept in a home safe.
In Sedaghatpour’s view, the loss of his crypto assets should have been covered by his homeowner’s insurance, since the cryptocurrency was his personal property. The insurance company, however, saw things differently.
Determined, Sedaghatpour decided to pursue legal action against Lemonade Insurance.
Lemonade’s response: while the hardware wallet itself is a physical object, it “does not imbue the data it contains with tangible properties.” Consequently, the loss of such data cannot be classified as a “direct physical loss” of property.
Regardless of the matter of storage, cryptocurrency remains intangible,argued the insurers.
Sedaghatpour’s lawsuit was dismissed in the end. Source: ca4.uscourts.gov
After several rounds of appeals, the court concluded that, under Virginia law, direct physical damage “requires present or impending material destruction or material harm.”
Because the digital theft of digital currency does not amount to a ‘direct physical loss,’ no coverage for Sedaghatpour’s loss of cryptocurrency is available under that section,the judges ruled.
Lemonade Insurance did, however, compensate Sedaghatpour for the “theft or unauthorized use of an electronic fund transfer card or access device used for deposit, withdrawal or transfer of funds.” The insurance policy limited this compensation to $500.
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