Vicor Corp. v. Vigilant Insurance
674 F.3d 1
1st Cir.2012Background
- Vicor manufactured power converters used in Ericsson radio base stations; outages in 2003 tied to a Vicor component defect.
- Ericsson sued Vicor in California in May 2004 for multiple theories; settled in 2007 for $50 million.
- Vigilant and Federal paid about $13 million of the Ericsson settlement; Vicor funded the remaining $37 million.
- Vicor sued its insurers in Massachusetts federal court seeking indemnification for the $37 million and asserted coverage under E&O and GL policies.
- Policies: Vigilant and Federal provided primary GL and E&O coverage; Continental provided an excess policy; the dispute centered on whether loss-of-use damages included emergency response costs/settlements.
- Jury awarded Vicor $17.3 million; district court reduced by $4 million and entered judgment for Vicor at $13.3 million plus interest; case and cross-appeals followed seeking further relief.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether loss of use damages include emergency response costs | Vicor argues broad loss-of-use includes emergency costs | Insurers say emergency costs are not loss of use | Instruction erroneous; emergency costs not classic loss of use per se. |
| Scope of emergency repairs as loss of use | Vicor contends emergency repairs fall within loss of use | Insurers say repairs are excluded unless emergency and necessary to restore use | Emergency repairs not covered as loss of use; remand for proper instructions. |
| Attorney-client/work product privilege regarding Ericsson documents | Vicor asserts privilege protects communications | Insurers seek disclosure under common interest/work product exceptions | District court abused by denying motion to compel; remand for tailored order. |
| Vicor's cross-appeal on defense fees entitlement | Vicor seeks full fee recovery previously awarded | Insurers challenge basis/clarity of fee award | Vacate fee award for remand with clearer reasoning; fees to be reconsidered. |
Key Cases Cited
- Atmel Corp. v. St. Paul Fire & Marine Ins. Co., 430 F.Supp.2d 989 (N.D. Cal. 2006) (loss-of-use damages require a direct connection to loss of use; not merely but-for causation)
- Anthem Electronics, Inc. v. Pacific Employers Insurance Co., 302 F.3d 1049 (9th Cir. 2002) (duty-to-defend; loss of use damages analysis different in underlying case)
- Urico v. Parnell Oil Co., 708 F.2d 852 (1st Cir. 1983) (loss-of-use damages are tied to the period of unavailability)
- F & H Construction v. ITT Hartford Insurance Co. of the Midwest, 118 Cal.App.4th 364 (Cal. App. 2004) (damages for repair/modification not loss of use; insurance purposes bar covering insured's own defective work)
- Commerce Ins. Co. v. Betty Caplette Builders, Inc., 420 Mass. 87, 647 N.E.2d 1211 (Mass. 1995) (liability insurance not covering economic loss from repairing own defective work)
- Cody v. Conn. Gen. Life Ins. Co., 387 Mass. 142, 439 N.E.2d 234 (Mass. 1982) (interpretation of Massachusetts insurance policy terms; objective reasonable insured expectations)