This summary was computer-generated without any editorial revision. It is not official, has not been checked for accuracy, and is NOT citable.
Facts
A computer repair business serviced a personal computer containing critical business data without backing up the files, despite being informed of their importance. The repair process involved reformatting the hard drive, which initially made the data inaccessible. The customer was erroneously advised that the data was irretrievable, leading to its permanent loss when the computer was used further. The customer and their employer sought damages for the cost of reconstructing the lost files (paras 2-3).
Procedural History
- District Court of Bernalillo County: Held that the insurer, Fireman’s Fund Insurance Company, had no duty to indemnify the computer repair business for damages related to the data loss, concluding that the policy exclusions applied (paras 4-5).
Parties' Submissions
- Appellants (Computer Corner, the customer, and the employer): Argued that the insurer was obligated to indemnify the repair business under the commercial general liability policy, as the data loss was not intentional and did not fall under the policy exclusions (paras 4-5, 9-11, 13-20).
- Appellee (Fireman’s Fund Insurance Company): Contended that the policy excluded coverage for the data loss under provisions related to intentional acts, substandard work, and business risk exclusions, and that the repair business’s actions were not covered (paras 9-12, 13-20).
Legal Issues
- Did the insurer have a duty to indemnify the computer repair business for damages arising from the loss of data stored on the customer’s hard drive?
- Did the policy exclusions for intentional acts, substandard work, and business risks apply to the circumstances of the case?
Disposition
- The Court of Appeals reversed the district court’s judgment, holding that the insurer had a duty to indemnify the computer repair business (para 22).
Reasons
Per Alarid J. (Fry and Robinson JJ. concurring):
The Court found that the district court erred in concluding that the data loss was intentional. The evidence showed that the loss resulted from miscommunication and carelessness, not an intent to cause harm. The technician’s actions could not be equated with the repair business’s state of mind, and the loss was not expected or intended from the business’s perspective (paras 9-11).
The Court rejected the application of the policy’s “business risk” exclusions. It held that the exclusions were ambiguous and unintelligible to a reasonable insured. The exclusions did not clearly apply to pre-existing customer data, which was not part of the repair business’s product or work (paras 13-20).
The Court emphasized that insurance policies must be interpreted from the perspective of a reasonable insured, and ambiguities must be resolved in favor of coverage. The insurer failed to draft clear and unambiguous exclusions, and the policy language did not support denying coverage in this case (paras 7-8, 20-21).
The judgment in favor of the insurer was reversed, and the case was remanded for entry of judgment in favor of the appellants on the issue of indemnification (para 22).