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Case Briefs

By ALM Staff | Law Journal Newsletters |
November 01, 2003

Damage to Computer Systems Caused by Installation of Software Not Covered Property Damage

In America Online v. St. Paul Mercury Insurance Co., No. 02-2098, ___ F.3d ___ (4th Cir. October 15, 2003), the U.S. Court of Appeals for the Fourth Circuit held that, under Virginia law, an insurer has no duty to defend or indemnify its insured, America Online (AOL), against claims that installation of version 5.0 of its internet-access software caused significant damage to its customers' computer systems and data.

In October 1999 AOL released Version 5.0 of its access software, used by its subscribers to access the Internet and AOL's content services. Soon thereafter, AOL was sued in numerous class actions by subscribers who claimed that installation of the software caused interference with their computers' communications settings, rendered non-AOL programs inoperable, altered hundreds of files on their computer hard drives (including critical system files), and was difficult to remove once installed. Many of the underlying plaintiffs alleged that their computer systems had become totally inoperable as a result.

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