SUMMARY

• A U.S. appeals court ruled that home insurance policies do not cover cryptocurrency losses, upholding Lemonade Insurance’s denial of a $170,000 claim from homeowner Ali Sedaghatpour.
• This ruling establishes a precedent for crypto loss cases and highlights the need for specialized insurance products, as traditional home insurance policies offer limited coverage for digital assets.

A U.S. appeals court has ruled that home insurance policies do not cover cryptocurrency losses, certifying that such arrangements only apply to physical property. On October 24, the Fourth Circuit Appeals Court maintained Lemonade Insurance’s decision to deny property holder Ali Sedaghatpour’s $170,000 claim for funds lost to a crypto scam.

Sedaghatpour recorded the claim after he exchanged $170,000 to APYHarvest in December 2021, which was later distinguished as a scam by the Central Bank of Ireland. He had gained access to a crypto wallet key, which he claimed to have secured in his home safe. Upon finding that his crypto possessions had been emptied, Sedaghatpour sought coverage beneath his homeowner’s arrangement, which covers individual property losses up to $160,000.

Lemonade Insurance contended that whereas a cold hardware wallet is unmistakable, cryptocurrency itself is digital and does not qualify beneath the policy’s definition of “direct physical misfortune.” The court concurred, deciding that Sedaghatpour’s arrangement was restricted to misfortunes including physical hurt or annihilation of tangible resources, and as cryptocurrency is intangible, the robbery did not meet this criterion.

Following an request, a three-judge board maintained the Virginia Area Court’s ruling, expressing, “We have checked on the record and discover no reversible mistake.” The court referenced Virginia law, attesting that “direct physical misfortune” requires material destruction or hurt. Since cryptocurrency cannot endure physical harm, the homeowner’s arrangement was regarded inapplicable.

This ruling might set a critical point of reference for future cases including crypto losses, clarifying that standard domestic insurance arrangements may not cover computerized resources. While the court’s choice highlights the restrictions of conventional insurance arrangements, it also underscores the developing demand for specialized crypto insurance products.

The market for digital asset insurance is still in its early stages, with companies like Evertas and Relm Insurance starting to offer custom fitted scope for exchanges and custodians against hacking, burglary, and operational issues. In any case, individual crypto insurance choices stay limited.