Burt v. Travelers Com. Ins. Co.
The United States District Court for the Northern District of California has held that the theft of cryptocurrency is not covered under a homeowner’s policy requiring a “direct physical loss” due to its intangible nature, rendering it unable to suffer a physical loss. The plaintiffs inherited digital property of substantial value from their late father, which was stolen. The plaintiffs filed a claim with the defendant insurer, with whom the father had purchased a homeowners’ insurance policy from. The policy provided coverage for personal property due to theft, subject to certain conditions. Under the policy, coverage was only afforded where the insured’s personal property sustained a “direct physical loss.” The court, applying California law, noted that California courts have interpreted “direct physical loss” to require physical alteration of the property, given the ordinary meaning of the phrase. As such, the court ultimately concluded that as the plaintiff’s complaint did not allege “direct physical loss,” no policy coverage existed for the theft of the insured’s cryptocurrency as a matter of law.