Personal Injury Lawyer Robert (Tito) Meyer, Las Cruces New Mexico

We buy insurance hoping we never need it. But when you need it, your insurance company will be there to cover you, right? When Computer Corner, a family-owned personal computer sales and service business needed its insurer, Fireman's Fund Insurance Co. was not there. Fortunately, a lawyer was there to help Computer Corner and the New Mexico Court Of Appeals forced Fireman's Fund to provide the insurance coverage Computer Corner had paid for. This is what happened, according to the Court. 

The Loss: On May 9, 1995, Charles Henry (Henry) took his personal computer to Computer Corner for service. The computer displayed the error message "major disk error." At the time, Henry was employed by J.R. Hale Contracting Company (Contracting Company). Various data files that were important to the operation of Contracting Company's business were stored on the computer hard drive. Henry informed the person who received his computer of the presence of these files and warned this employee that these files were not backed up.

In repairing Henry's computer, the technician reformatted the hard drive. No backup of data was performed on the hard drive. Henry picked up his computer on May 10, 1995. As a result of the reformatting, Henry was unable to access the data stored on his hard drive. Henry sought advice from Computer Corner. Henry was erroneously told that the data could not be retrieved when in fact, the files still existed on his hard drive and could have been retrieved if certain procedures had been employed.  After receiving the erroneous advice from Computer Corner, Henry used the computer, overwriting the pre-existing files and permanently destroying them.

The loss of the computer files caused serious problems to Contracting Company's business, and it ended up suing Computer Corner seeking damages for the cost of reconstructing the computer files. Fireman's Fund agreed to defend Computer Corner, but refused to pay what Computer Corner ended up owing Contracting Company. 

Insurer Refuses To Pay: Fireman's Fund refused coverage because for two reasons: 1) the policy excludes coverage for intentional acts, and Computer Corner had intentionally reformatted the computer; 2) the policy excludes liability coverage for substandard work product or services. (This second exclusion is to prevent the insured from using the policy to underwrite the insured's business warranties, guarantees, and assurances to customers. is commonly known as the >work product' or >business risk'

So, Computer Corner had to sue Fireman's Fund to get the insurer to pay Contracting Company. 1) Computer Corner did not intend to erase the files, even though it intentionally reformatted the computer. 2) The Contracting Company's files that were erased pre-existed any work done by Computer Corner. Computer Corner was not working on those files, so it was not Computer Corner's >product' that was damaged.

Court Disagrees With Insurer: The Court Of Appeals examined Fireman's Fund's argument that, Section II.H.1.(m) of the policy provides that "this insurance" does not apply to "Property damage to your work arising out of it or any part of it and included in the products-completed operations hazard." (Emphasis in original). This provision is greatly complicated by the fact that it incorporates three terms "property damage," "your work" and "products-completed operations hazard" that are defined elsewhere in the policy. In our view, this exclusion, when read together with the defined terms, is "confusing and open to numerous interpretations."

The language at issue should be considered not from the viewpoint of a lawyer, or a person with training in the insurance field, but from the standpoint of a reasonably intelligent layman, viewing the matter fairly and reasonably, in accordance with the usual and natural meaning of the words, and in the light of existing circumstances, prior to and contemporaneous with the making of the policy.

Considering the difficulty this provision presents to this Court in its own effort to decode Fireman's policy, we conclude that this exclusion is unintelligible from the standpoint of a hypothetical reasonable insured operating a computer repair service. We find it difficult to believe that anyone genuinely interested in communicating information to another person whether in a cookbook, a home appliance manual, or a contract would employ the type of convoluted, intractable language used in Fireman's policy. Fireman's exclusion appears as much designed to provide Fireman's lawyers with the widest latitude in making arguments against coverage once a coverage dispute has arisen, as to clearly communicate to lay insureds specific limits on the scope of coverage.

Court Slams Insurance Companies: It would be somewhat ludicrous for us to say this policy is not ambiguous. It is. But no more so than most others. Ambiguity and incomprehensibility seem to be the favorite tools of the insurance trade in drafting policies. Most are a virtually impenetrable thicket of incomprehensible verbosity . . . . The miracle of it all is that the English language can be subjected to such abuse and still remain an instrument of communication.

How could they say that about a nice insurance company? To read more, see Computer Corner, Inc. vs. Fireman's Fund Insurance Co., 2002-NMCA-054.

Home  Biography  Staff  Articles & Publications  Location - Map  Contact Us

The information contained in this site is not, nor is it intended to be, legal advice.
You should consult an attorney for individual advice regarding your own situation.
Copyright © 2008 by Robert (Tito) Meyer, Personal Injury Lawyer, Las Cruces NM. All rights reserved.

Web Design & Hosting by Art Schobey Interactive - Las Cruces