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Unauthorized internet reseller of plaintiff’s products is not guilty of trademark infringement, and does not cause actionable initial interest confusion, by using plaintiff’s trademarks in meta tags of website at which plaintiff’s and its competitors’ products are sold, and in...

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American Guarantee & Liability Insurance Co. v. Ingram Micro, Inc.

Civ. 99-185 TUC ACM, 2000 U.S. Dist. Lexis 7299 (D. Ariz., April 19, 2000)

Court holds that defendant's loss of the use and functionality of its computers as a result of a power outage constitutes "direct physical loss or damage" within the meaning of a property damage insurance policy issued by the plaintiff. The court reached this conclusion notwithstanding the fact that the computers in question retained the inherent ability after the power outage to perform the same functions as previously. The loss of use was caused instead by the loss of custom programming contained in the computers' RAM as a result of the power outage.

Defendant Ingram Micro, Inc. ("Ingram") is a wholesale distributor of microcomputer products. The company uses a computer system to process product orders, and keep track of its customers, products and daily transactions. Ingram obtained an insurance policy from plaintiff which insured Ingram's "real and personal property, business income and operations ... " against "All Risks of direct physical loss or damage from any cause, howsoever or wheresoever occurring ...". Ingram's computers were insured under the policy.

In December 1998, a power outage at an Ingram facility caused all of the computers located in that facility to stop working. This power outage caused a number of Ingram's computers to lose custom programming configurations maintained in their random access memory, which in turn prevented them from functioning. As a result, Ingram was unable to use some of its computers for a period of approximately eight hours, during which time Ingram could not conduct its business. Eventually, power was restored, Ingram diagnosed the nature of the computer problems the power outage had caused and rectified the same.

The court granted Ingram's motion for partial summary judgment, holding that Ingram's computers had sustained covered "physical damage." Said the court:

At a time when computer technology dominates our professional as well as personal lives, the Court must side with Ingram's broader definition of "physical damage." The Court finds that "physical damage" is not restricted to the physical destruction or harm of computer circuitry, but includes loss of access, loss of use and loss of functionality.

In so holding, the court rejected the insurer's argument that defendant's losses were not covered by the insurance policy at issue because the computer equipment was not "physically damaged." Such a result, argued the insurer, was mandated by the fact that the capability of the computer equipment in question to perform its intended functions remained intact. Rejecting this argument, the court stated:

Lawmakers around the country have determined that when a computer's date is unavailable, there is damage, when a computer's services are interrupted, there is damage; and when a computer's software or network is alter, there is damage. Restricting the Policy's language to that proposed by American would be archaic.
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