Travelers Denies Coverage Under Homeowners’ Policy for Lost Cryptocurrency

News | August 24, 2022 By:

On Tuesday, August 16, 2022, the United States District Court for the Northern District of California entered an order granting a motion filed by Travelers Commercial Insurance Company relating to an insurance claim filed by Heidi Burt and Kyle Burt. The case is styled as ‘Burt et al v. Travelers Commercial Insurance Company’ with case number #22-cv-03157-JSC.

The following are as alleged and summarized from the filing.

The plaintiffs are two siblings who received $339,000 worth of digital assets from their father, Harry Burt. Mr. Burt acquired a Coinbase account in April 2020 and began purchasing digital assets like Bitcoin, Ethereum, Chainlink, and Yearn Finance. When Mr. Burt passed away in November 2020, he left his two children, the Plaintiffs, his whole estate. Hackers gained access to Mr. Burt’s Coinbase account and email address in April 2021. They moved the digital assets from Mr. Burt’s Coinbase to their own electronic “wallet” in less than 24 hours.

Mr. Burt bought homeowners insurance from Defendant. Policy No. 991376774 633 was in effect from June 16, 2020, to June 16, 2021, and provides $555,800 in “personal property” coverage. The policy generally covered “losses of personal property due to ‘theft,’ including ‘attempted theft and loss of property from a known place when it is likely that the property has been stolen” as long as it was a “direct physical loss to property.”

In June 2021, the plaintiffs submitted a claim for the theft of their digital property to Defendant. There were exclusions, just like with any insurance policy. The “currency” and “security” exclusions were the ones that Travelers used to reject the claim, although Travelers did not offer a written justification.

The plaintiffs sued Travelers for breach of contract, breach of the implied covenant of good faith and fair dealing, and violations of California’s Unfair Competition Law.

On July 7, 2022, the Travelers Commercial Insurance Company filed the subject motion, entitled Motion to Dismiss, for failure to state a claim.

The court ruled in favor of Travelers. The court stated that although the cryptocurrency in question was undoubtedly stolen, it was not a direct physical loss under the insurance, which only covered “direct physical loss to property.”

The order reads:

“Here, as alleged in the complaint, Plaintiffs’ loss of their cryptocurrency is not, as a matter of law, a direct physical loss. They do not, and cannot, allege facts that give rise to a plausible inference that cryptocurrency “has a material existence, formed out of tangible matter, and is perceptible to the sense of touch.”

The order goes on:

“Finally, that the Policy specifically covers “prerecorded computer programs available on the retail market,” (Dkt. No. 1 at 55), does not suggest that Plaintiffs have plausibly alleged that there was direct physical loss to the cryptocurrency. Plaintiffs have not shown that there can never be no direct physical damage to a prerecorded computer program available on the retail market such that the provision somehow creates an ambiguity as to the meaning of “direct physical loss to.” Accordingly, Plaintiffs fail to state a claim for breach of contract.”

The order additionally notes:

“Because the complaint alleges a loss not covered by the insurance policy, Plaintiffs fail to state a claim for breach of contract or breach of the implied covenant of good faith and fair dealing. Accordingly, they also fail to state a derivative claim under California’s Unfair Competition Law and for declaratory relief.


Defendants’ motion to dismiss is GRANTED with leave to amend. Plaintiffs may file an amended complaint on or before September 15, 2022. If no amended complaint is filed by that date, judgment will be entered. The initial case management conference set for August 31, 2022 is VACATED.'”

Please contact BlockTribune for access to a copy of this filing.