California Appellate Court Rules That Property Insurance Policy Does Not Cover Loss Of Computer Data
A California intermediate appellate court has ruled that a first party property insurance policy does not cover the loss of computer data resulting from a computer system ?crash.? The appellate court affirmed a trial court?s judgment that no coverage exists where a computer data loss is unaccompanied by the destruction of the physical components storing that data. The policyholder temporarily lost client data when human error or a software problem caused its computer system to stop operating and ?crash.? The policyholder manually reentered the lost data into the computer system so that it could resume its normal business operations. The policyholder sought coverage under its first party property insurance policy. The insurer denied coverage for the claim on the ground that there was no ?direct physical loss of or damage to property.? This article explains that that in a declaratory judgment action brought by the policyholder against the insurer, the trial court granted summary judgment to the insurer, and the policyholder appealed. It explains the appellate court decision and implications towards this policy.