Computer Data Loss Covered by BOP?

Q

Our client, a tenant insured by form BP 00 02 12 99, had a loss to his computer hard drive and data, and also to his floppy drive, resulting in a need to repair and rebuild files. The loss was a result of a fire to the adjoining building. During the fire there was no power loss. However, the computer technical repairman who fixed the system stated “Concerning the immediate time proximity to the fire in the building directly adjacent to you, and the fact that the symptoms are consistent with those induced by a significant power surge, I conclude that your problems are a direct result of the fire and the power fluctuations it most certainly caused.”

An independent adjusting company representing the insurance carrier is denying coverage due to exclusion 1.e., power failure. It is our contention that there is coverage due to the damage caused by the fire creating smoke and power fluctuations. No power failure occurred.

Minnesota Subscriber

A

The first place to look for coverage is in the policy's insuring agreement. It agrees to pay for direct physical loss caused by a covered cause of loss. If the only damage to your insured's computer was electrical or magnetic injury to the data stored on the hard drive and floppy disk drive, it does not meet the policy's requirement that the loss be physical. If no physical loss occurred, there is no need to look further to the exclusions.

If, however, a power surge did cause physical damage to the computer, the power failure exclusion must be examined. There is a difference between power failure, which is a cessation of power,  and a power surge. Therefore, the power failure exclusion does not apply.

However, and unfortunately for your insured, the electrical apparatus exclusion (2.a.) does apply. It excludes damage caused by artificially generated electrical current that disturbs electrical devices, appliances, or wires, unless loss by fire results. This is a loss that would have been better covered by an electronic data processing policy.

This premium content is locked for FC&S Coverage Interpretation Subscribers

Enjoy unlimited access to the trusted solution for successful interpretation and analyses of complex insurance policies.

  • Quality content from industry experts with over 60 years insurance experience, combined
  • Customizable alerts of changes in relevant policies and trends
  • Search and navigate Q&As to find answers to your specific questions
  • Filter by article, discussion, analysis and more to find the exact information you’re looking for
  • Continually updated to bring you the latest reports, trending topics, and coverage analysis