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'Tangible Property' Defined in the Computer Age

By William P. Shelley, Richard Bortnick and Samantha Evans

With the increasing use of social media for marketing and advertising purposes, businesses of all sizes are seeking insurance coverage for various types of Internet-based exposures. Among others, companies are looking to insure against claims raised by users viewing or otherwise accessing a company's websites and advertisements for damage to hardware, data, information, and other computer components.

Policyholders seeking coverage for cyber-type loss typically have done so under traditional comprehensive general liability (“CGL”) policies that insure against physical damage to tangible property and/or loss of use of tangible property. Whether a claim is covered under a standard CGL or property policy depends on the definition of “tangible property,” with courts generally finding that damage to computer hardware or similar components triggers such coverage, while damage to computer data and information does not. In the recent decision of Eyeblaster v. Federal Insurance Company, 613 F.3d 797 (2010), the Eighth Circuit construed the definition of “tangible property” to include the user's computer, finding loss of use of a computer to be covered “property damage.”

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