Q

Our insured suffered a covered loss to its computerized telephone system with damages totaling more than $9,000 to the main control card, digital interface card, and line card. The insured has blanket building and contents coverage subject to a $10,000 deductible. The insured also has a computer equipment floater through our company which has a deductible of $250.

The insured suggests that since the telephone system is computerized it should be considered computer equipment. We contend that a telephone system is not a computer, per se, and is subject to the building and contents $10,000 deductible. Our opinion is based on the policy's definition of computer equipment as “a network of machine components capable of accepting information, processing it according to a plan, and producing the desired results.”

Can a telephone system be “computer equipment?”

Massachusetts Subscriber

A

The damaged property does qualify for coverage under the computer equipment floater. The $250 deductible applies. In coming to this opinion, we discussed the matter with our Multi-Media and Production Services Departments managers and they aided in our interpretation.

By the policy's terms, computer equipment is a network of machine components (yes) capable of accepting information (yes), processing it according to a plan (or program, yes), and producing the desired results (yes). This is a broad definition, but if your company's forms drafters had wanted to narrow computer coverage to only traditional desktop personal computers, such language could have been employed.

To our Multi-Media manager, the idea of components of the telephone system as “computer equipment” is no leap at all. His opinion is that if the (damaged) components are directly integrated or integral to a central processing unit (CPU) the component is “computer equipment.” By this logic, the handsets would not be computer equipment, but control and interface cards would definitely be. Reviewing the list of damaged equipment, he is of the opinion that the main control card, digital interface card and line card are computer equipment. Our Production Services manager is of the same opinion; he thinks of our digital telephone system, which can be interfaced directly into our company mainframe computer and has a CPU of its own, as computer equipment.

As technology has advanced at breakneck speed, the traditional idea of what constitutes a computer has broadened. Heat and AC systems are controlled by computer equipment, restaurant and manufacturing processes involve nontraditional computers, and telephone systems make wide use of computer equipment.

We believe that the repairs to the telephone system are subject to the deductible for computer equipment, and that the policy must respond to the loss. Of course, this is conditioned on, as our MM manager phrased it, the components being directly integrated or integratable into a CPU.