INSURANCE-RELATED COURT CASES
Digested from case reports published online
COURT DECISIONS
Sorry no coverage for loss of use
Sorry, no coverage for loss of use
The Helping Art Liberate Orphans Foundation (HALO) holds an annual art auction. In 2022, it arranged for the event to be held online. Needing outside expertise to make the change, they worked with two companies, Paradise Productions KC, LLC (Paradise), which was responsible for broadcasting the event, and Qtego Fundraising Services, which provided software that let viewers place realtime bids on items.
Unfortunately, immediately before the event went live, the internet connection set up by Paradise broke for a short time. While it was re-established fairly quickly, persons interested in participating were unable to view or make bids as the connection to the bidding software could not be fixed. HALO, on its own, arranged a different connection using Facebook. However, it did not have the capability to synchronize viewing with bidding, and the fundraiser did not perform well. Because of their loss, HALO sought financial compensation from Paradise.
At the time of the loss, Paradise was insured by a general liability policy from Auto-Owners Insurance Company (Auto-Owners). Faced with a claim that it had negligently breached its contract, Paradise assigned its claim rights under their insurer to HALO. Auto-Owners responded to the action by seeking a summary judgment that its policy excluded the incident. When a lower court ruled in favor of the insurer, HALO appealed.
Upon appeal, HALO pressed its argument that the Paradise outage
prevented bidders from using a lives-treaming service as contracted. The inability to watch the auction in a manner that permitted bidding in real time financially harmed the fundraiser. The company’s opinion was that Auto-Owner’s policy language can be read in a manner that covers the claim. HALO referred specifically to the policy stating that it applies to “property damage,” including the “[l]oss of use of tangible property that is not physically injured.”
The higher court considered HALO’s view. However, it was also bound to pay attention to the policy exclusion Auto-Owners relied on to deny HALO’s claim, including whether the issue involved ambiguity. Policy language barred coverage for “Damages arising out of the loss of, loss of use of, damage to, corruption of, inability to access, or inability to manipulate electronic data.” Further, the policy contained its own definition of “electronic data.”
Ultimately, the court addressed its responsibility to determine whether the loss was subject to the electronic data exclusion. In its view, the impairment that took place just prior to HALO’s online auction going live definitely involved access to electronic data. It also held that the policy exclusion was unambiguous and clearly barred coverage. The lower court decision in favor of Auto-Owners was affirmed.
Auto-Owners Insurance Co. v. Halo Foundation: Helping Art Liberate Orphans—U.S. Court of Appeals for the Eighth Circuit—No. 25-1275—January 27, 2026.
