Narrative Opinion Summary
This case involves a dispute between St. Paul Fire and Marine Insurance Company and National Computer Systems, Inc. (NCS) regarding the insurer's obligation to defend and indemnify NCS in litigation initiated by Boeing Computer Systems. NCS had been accused by Boeing of misappropriating proprietary information through a former Boeing employee, which allegedly gave NCS an unfair advantage in a bid for a U.S. Department of Education contract. The trial court found that St. Paul Fire's insurance policy was obligated to defend NCS, given that any part of the action might be covered under the policy. However, St. Paul Fire contested the decision, arguing that the claims involved intangible property not covered by the policy. The court ultimately determined that the claims did not involve tangible property damage under the policy, and thus, indemnification was not required. Nevertheless, the court affirmed St. Paul Fire's duty to provide a defense and reimburse NCS for legal costs, excluding fees related to counterclaims. The decision was partially reversed and remanded for further proceedings to accurately differentiate and award defense costs. The case underscores the broader duty to defend compared to indemnification and the complex nature of interpreting insurance coverage in cases involving proprietary information.
Legal Issues Addressed
Distinction between Tangible and Intangible Propertysubscribe to see similar legal issues
Application: The court assessed whether Boeing's claims involved tangible property damage, concluding that the misappropriation of proprietary information did not constitute damage to tangible property under the insurance policy.
Reasoning: The court concluded that Boeing's claims did not indicate damage to tangible property under the insurance policy.
Duty to Defend under Insurance Policysubscribe to see similar legal issues
Application: The court determined that St. Paul Fire had a duty to defend NCS under its insurance policy, despite the claims stemming from misappropriation of information, as any part of the cause of action could arguably be covered.
Reasoning: An insurer must defend an insured if any part of the cause of action is arguably covered by the policy.
Duty to Indemnify under Insurance Policysubscribe to see similar legal issues
Application: While the duty to defend was affirmed, the court left open the question of St. Paul Fire's duty to indemnify NCS, pending further proceedings.
Reasoning: The obligation of St. Paul Fire to indemnify NCS remained uncertain.
Interpretation of Insurance Policy Exclusionssubscribe to see similar legal issues
Application: The court noted that even if the misappropriated information were tangible, it would be excluded under the 'control of property' exclusion, as the property was damaged on the insured's premises while being worked on.
Reasoning: If tangible, it is still excluded under the 'control of property' exclusion, which denies coverage for property damaged on the insured's premises while being worked on.
Prejudgment Interest on Settlement Amountssubscribe to see similar legal issues
Application: NCS sought prejudgment interest from an earlier date than awarded, arguing it should accrue from the date of settlement with Boeing.
Reasoning: NCS contended that the interest should accrue from the settlement date in 1988.
Reimbursement of Defense Costssubscribe to see similar legal issues
Application: The court awarded NCS reimbursement for defense costs incurred in the litigation with Boeing, finding that the insurer must cover reasonable attorney fees for NCS's defense.
Reasoning: The trial court awarded NCS attorney fees, including those from unrelated litigation.