Power Surge, Damaged Computers, and Incompatible X-Ray Machines

November 19, 2012

A power surge destroyed the insured's computers. The insured is a dentist and has the BP 00 03 01 06 form. The office is wired as a full network, and everything is interconnected to the computers. When the new computer system was installed, the four x-ray machines were not compatible. The question is whether the x-ray units are covered for replacement so they will be compatible with the new computers.

My analysis is that they are not. The x-ray machines may possibly fall under the definition of a “computer” (H. 1. b.), but there was no direct physical loss as prescribed in the coverage agreement to the x-ray machines. That loss is consequential.

Do you believe this is a correct denial?

Oregon Subscriber

The x-ray machines would not fall under the definition of “computer.” However, the whole network could be seen as damaged, and as such, an argument could be made that the x-ray machines should be replaced because they are part of the damaged network. From what you describe, the computers are necessary for the functionality of the x-ray machines. The insured should be indemnified to pre-loss condition of the networked equipment. If replacing the computers made the x-ray portion of the network nonfunctional, then the x-ray machines should be replaced.