Computer Sciences Corporation (CSC) licenses a tool called “Colossus” that helps insurers evaluate bodily injury claims. In 2005, over 500 Colossus users were sued, with CSC, in a class action in Arkansas state court, entitled Hensley v. CSC. The case ended after the insurers agreed to pay hundreds of millions of dollars to members of the Arkansas and Oklahoma Bars.
In February 2012, exactly none of those insurers was disappointed to learn that CSC had failed to obtain coverage for Hensley under its CGL policy, which covered amounts CSC had to pay “for … bodily injury … that … is caused by an event,” such as an “accident.” The Hensley plaintiffs were all injured in accidents; they alleged that CSC and the insurers had conspired to underpay their claims for uninsured/underinsured motorist coverage. CSC argued that the claim sought “damages for … bodily injury.”
In Travelers v. CSC, a California court rejected that argument and affirmed summary judgment for Travelers. The court cited a California Supreme Court decision holding that “the word ‘accident’ in … a liability policy refers to the conduct of the insured for which liability is sought to be imposed ….” Because CSC’s conduct had not caused the bodily injuries of the Hensley plaintiffs, the conditions for coverage were not met.
The court observed that CSC confused CGL coverage with errors and omissions coverage. In fact, one of the insurer defendants in Hensley obtained coverage under an Insurance Company Professional Liability Policy. In Chubb v. Grange Mutual Casualty, the issuer of the policy argued (among other things) that Grange, its insured, had incurred liability by licensing the Colossus product, rather than “while performing Insurance Services.” The federal court in Ohio found, however, that the gravamen of Hensley was that Grange had improperly used Colossus to underpay claims while discharging its duty as an insurer.