News Summary
Texas Gulf Bank is taking legal action against its insurers for denying coverage related to significant losses from a cyber fraud incident. The lawsuit aims to recover approximately $1.5 million lost due to unauthorized wire transfers, which resulted from a breach involving a client, Sequeira Civil Construction. The bank claims the insurers misapplied policy exclusions and is seeking substantial damages and attorney fees. As cyber threats increase, this case may set important precedents for cyber insurance policies and financial institutions.
Texas Gulf Bank Takes Legal Action Against Insurers Over Cyber Fraud Losses
In a move that shines a spotlight on the complex world of cyber insurance, Texas Gulf Bank, N.A. is taking a bold stand against its insurance providers. The bank has filed a lawsuit in the US District Court for the Southern District of Texas, seeking recovery of approximately $1.5 million in losses stemming from a cyber fraud incident that left them and one of their clients reeling.
The Heart of the Dispute
The drama began with a cybersecurity breach involving Sequeira Civil Construction, LLC (SC2), a customer of Texas Gulf Bank. In October 2023, SC2 sued the bank, alleging that unauthorized wire transfers were made from its account, which violated the terms of their Wire Transfer Agreement. Trouble erupted when a cybercriminal infiltrated the email account of SC2 employee Beth Behenna, launching fraudulent wire transfer requests beginning on August 3, 2023.
Instead of reaching out to the contact number outlined in their agreement, Texas Gulf Bank mistakenly called a number provided in the fraudulent emails—leading to a series of unauthorized transfers. Although the bank managed to recall a portion of the funds amounting to $297,400, a staggering $1,481,540 remained unrecoverable.
Legal Fallout
On September 11, 2023, SC2 turned up the heat by demanding that Texas Gulf Bank cover the unrecovered funds. Eventually, in May 2025, the lawsuit between the two parties settled with the bank agreeing to a payout of $787,500.
Texas Gulf Bank promptly notified their insurance companies, including Great American Security Insurance Company, about SC2’s claim under their cyber policy. However, on October 12, 2023, ABA Insurance Services, acting on behalf of Great American Security, denied coverage. They cited a “Non-Company Security Breach Exclusion”, claiming they weren’t liable for breaches that didn’t involve their own computer systems. This sparked a wave of frustration for the bank, as they believed this exclusion was poorly interpreted and misapplied.
What’s at Stake?
The lawsuit highlights critical issues surrounding cyber insurance policies and the responsibilities they entail. As Texas Gulf Bank asserts their claim, they argue that the bond issued by Great American Alliance Insurance Company did not require adherence to a “Predetermined Telephone Number” in the written agreement. Yet, the denial of coverage rested heavily on this procedural detail.
Moreover, the bank accuses the insurance providers of not only breaching contracts but also of acting in bad faith. They allege that the insurers failed to conduct thorough investigations and didn’t adhere to Texas insurance statutes. Texas Gulf Bank is now seeking a significant sum of damages—no less than $1.2 million—in addition to attorney’s fees amounting to at least $50,000.
The Bigger Picture
This case poses important questions about how far policy exclusions reach when cybercriminals exploit vulnerabilities not related to the insured’s systems. It also raises eyebrows about what constitutes adequate verification procedures under financial institution bonds.
The outcome of this legal battle has implications beyond just Texas Gulf Bank and its insurers. As financial institutions find themselves battling increasingly sophisticated cyber threats, the complexities of cyber coverage are becoming clearer—and more critical. This case will likely influence how insurers and insured entities approach cyber risk and financial fraud coverage in the future.
Final Thoughts
The financial landscape is changing, and with it, the necessity for businesses to understand the fine print of their insurance policies becomes ever more crucial. As Texas Gulf Bank forges ahead with their lawsuit, the financial community, along with their clients, will be watching closely to see how this important case unfolds.
Deeper Dive: News & Info About This Topic
- Insurance Business
- Wikipedia: Cyber Insurance
- KHOU
- Google Search: Texas Gulf Bank lawsuit
- Times of India
- Google Scholar: Cyber Fraud Insurance Claims
- Houston Chronicle
- Encyclopedia Britannica: Cybersecurity
- KNUE
- Google News: Texas Gulf Bank cyber fraud
Author: STAFF HERE HOUSTON TX WRITER
HOUSTON STAFF WRITER The HOUSTON STAFF WRITER represents the experienced team at HEREHouston.com, your go-to source for actionable local news and information in Houston, Harris County, and beyond. Specializing in "news you can use," we cover essential topics like product reviews for personal and business needs, local business directories, politics, real estate trends, neighborhood insights, and state news affecting the area—with deep expertise drawn from years of dedicated reporting and strong community input, including local press releases and business updates. We deliver top reporting on high-value events such as Houston Livestock Show and Rodeo, Art Car Parade, and Chevron Houston Marathon. Our coverage extends to key organizations like the Greater Houston Partnership and Houston Area Urban League, plus leading businesses in energy and healthcare that power the local economy such as ExxonMobil, Schlumberger, and Houston Methodist. As part of the broader HERE network, including HEREAustinTX.com, HERECollegeStation.com, HEREDallas.com, and HERESanAntonio.com, we provide comprehensive, credible insights into Texas's dynamic landscape.
