OPINION
Appellant Lambrecht & Associates, Inc. (“Lambrecht”) sought coverage from State Farm Lloyds (“State Farm”) under a business insurance policy for the loss of computer data and the related loss of business income. Both Lambrecht and State Farm filed traditional motions for summary judgment on the question of coverage. In one issue on appeal, Lambrecht contends that the trial court erroneously granted State Farm’s motion for summary judgment and denied Lambrecht’s motion. We reverse the trial court’s order granting summary judgment for State Farm and remand the case for further proceedings.
Background
Lambrecht is an employment agency located in Tyler, Texas. Lambrecht’s income is generated by matching prospective employers and employees for a fee. All of the staff at Lambrecht use computers to *19 communicate with prospective employers and employees, either by printing and mailing information stored on the computers or by transmitting via electronic media or e-mail. In addition, the computers are used to input various types of information used in Lambrecht’s business. The computers used by Lambrecht’s employees were networked into a large central computer that functioned as a server and was equipped with certain pre-packaged software programs, including MS Office, Microsoft Access, and Norton Anti-Virus. The server was also used by Lambrecht’s office manager, Judi Ashley (“Ashley”), in the performance of her job responsibilities.
On or about February 9, 2000, Ashley noticed problems in the function of her computer. The computer began to have difficulty “booting up” and could not readily locate and retrieve stored information. The computer also began performing a number of “illegal functions” without command and ultimately “froze up.” After the computer “froze,” none of the information that had previously been stored could be retrieved, and no additional information could be loaded.
To restore its computer system, Lam-brecht had to replace its server, purchase a new operating system and other prepackaged software, and manually re-enter much of its data. As a result, Lambrecht’s employees were unable to use their computers to communicate with prospective employers and employees until the server was restored. The February 2000 monthly income statement showed a decrease in fee income, and Ashley attributed the decrease to Lambrecht’s inability to use its computers during the time the server was not functioning.
At the time of the computer failure, Lambrecht had a business insurance policy (the “policy”) with State Farm. Section 1, Coverage B of the policy stated that “we will pay for accidental direct physical loss to business personal property at the premises described.... ” Section 1, Coverage C of the policy stated that “[i]f loss of income coverage is shown in the Declarations, we will pay: 1. for the actual loss of ‘business income’ you sustained due to the necessary suspension of your ‘operations’ during this ‘period of restoration.’ The suspension must be caused by accidental direct physical loss to property at the described premises....”
Lambrecht filed a claim with State Farm for lost business income and for the expenses of replacing the server and software packages and hiring someone to input the company data on the new system. State Farm denied coverage, and Lam-brecht filed suit, alleging that the loss occurred “when an unauthorized individual, commonly known as a ‘hacker’ unlawfully gained entry into [Lambrecht’s] computer systems and injected into [Lambrecht’s] computers a program that is commonly known as a ‘computer virus.’ ” Both Lam-brecht and State Farm filed motions for summary judgment on the coverage issue. On May 7, 2001, the trial court signed a judgment granting State Farm’s motion, and this appeal followed.
Standard of Review
Summary judgment is appropriate if the motion and evidence establish that the moving party is entitled to judgment as a matter of law on the issues set out in the motion. Tex.R. Civ. P. 166a(c). A plaintiff moving for summary judgment must conclusively prove all essential elements of the claim.
See MMP Ltd. v. Jones,
In the case at hand, Lambrecht and State Farm both filed traditional motions for summary judgment
1
on the issue of coverage. In reviewing a traditional motion for summary judgment, we apply the following well-established standards: (1) the movant for summary judgment has the burden of showing that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law; (2) in deciding whether there is a disputed material fact issue precluding summary judgment, evidence favorable to the non-mov-ant will be taken as true; and (3) every reasonable inference must be indulged in favor of the non-movant and any doubts resolved in its favor.
Nixon v. Mr. Prop. Mgmt. Co.,
When parties file cross motions for summary judgment, each party in support of its own motion necessarily takes the position that there is no genuine issue of fact in the case and that it is entitled to judgment as a matter of law.
Ackermann v. Vordenbaum,
W4s State Farm Entitled to Judgment as a Matter of Law?
Insurance contracts are subject to the same rules of construction as ordinary contracts.
Trinity Universal Ins. Co. v. Cowan,
Section 1, Coverage B of the policy states that “[State Farm] will pay for accidental direct physical loss to business personal property at the premises described....” In its motion for summary judgment, State Farm maintained that the facts alleged by Lambrecht do not constitute a covered loss under the policy. Specifically, State Farm asserted that Lambrecht’s loss was neither physical nor accidental. State Farm further contended that, in addition to its failure to show a covered loss, Lambrecht failed to make certain police were notified of the loss as required by the policy. 2 According to State Farm, such notification is a condition precedent to coverage, which Lam-brecht failed to satisfy.
The order granting State Farm’s motion for summary judgment does not state the grounds on which the trial court relied. Consequently, the summary judgment must be affirmed if any one of the mov-ant’s theories has merit.
Star-Telegram, Inc. v. Doe,
Accidental Loss
State Farm contends that Lam-brecht’s damage could not have been accidental because the act that caused the damage (the hacker’s invasion) was voluntary and intentional. Lambrecht disagrees, contending that injuries caused by the intentional conduct of a third party can in some instances be considered accidental for purposes of determining insurance coverage. Courts determine whether certain conduct constitutes an “accident” for purposes of insurance coverage on a case-by-case basis. Wessinger v. Fire Ins. Exch., 949 S.W.2d 834, 837 (Tex.App.-Dallas 1997, no writ).
In support of its argument, Lambrecht cites
Republic Nat’l Life Ins. Co. v. Heyward,
[w]here an insured’s injuries are caused by the intentional acts of another, the injuries are nevertheless accidental within the terms of an insurance policy covering death by “accidental means” if *22 from the insured’s viewpoint his conduct was not such as to cause him to reasonably believe that it would result in his injury.
Heyward,
The policy defined “occurrence” as “ ‘an accident, including continuous or repeated exposure to substantially the same general harmful conditions.’ ” Id. Dallas Fire contended that there was no occurrence in this case because the actions of King’s employee were intentional. King asserted that while he did not intend to injure the plaintiff, he perhaps negligently hired, trained or supervised his employee and that from his standpoint, the plaintiffs injuries were the result of an accident, which is an occurrence invoking the duty to defend. Id. at 187-88.
In determining whether there had been an “occurrence” under the policy, the supreme court first determined from whose perspective the injury-triggering event must be viewed: the insured’s, the victim’s or the actor’s. Id. The court looked to the Heyward test to support its determination that a court should view the event from the insured’s standpoint. Id. at 189-90. Accordingly, the court held that the petition against King alleged an “occurrence” because the employee’s intent to commit an assault was not imputed to King. Id. at 193.
State Farm cites
Trinity Universal Ins. Co. v. Cowan,
In the instant case, the only evidence of the cause of the loss was contained in Ashley’s affidavit, where she stated that a virus caused the computers to have difficulties while “booting up,” perform a number of “illegal functions” and eventually completely “freeze up,” thereby rendering the computers useless.
3
Therefore, the issue presented in the instant case is markedly different from the issue presented in
Cowan.
State Farm has not alleged that Lambrecht participated in any conduct that, when viewed from Lam-brecht’s perspective, would cause Lam-brecht to reasonably believe that such conduct would result in its injury. The record is devoid of any evidence, nor has State Farm ever alleged, that Lambrecht was involved in any voluntary or intentional conduct or took any action which caused the damage Lambrecht suffered.
See Acceptance Ins. Co. v. Lifecare Corp.,
Physical Loss
The policy insures against “accidental direct physical loss.” State Farm argues that the loss of information on Lambrecht’s computer systems was not a “physical” loss because the data on Lam-brecht’s computers did not exist in physical or tangible form. Lambrecht argues *24 that coverage is available under the policy for the resulting loss of (1) the server, (2) pre-packaged software for the server, (3) all information stored on the computer, and (4) business income during the time the computers and server were unusable based on the express language of the policy itself.
Applicable Policy Provisions
Under “Coverage B — Business Personal Property,” the policy insures against “accidental physical loss” to business personal property, including “(1) property you own that is used in your business, [and] (2) property of others that is in your care, custody or control....” The applicable business personal property that is excluded from coverage is
[t]he cost to research, replace or restore the information on valuable papers and records, including those which exist on electronic or magnetic media, except as provided in the Extensions of Coverage and Coverage C — Loss of Income.
Under the heading “Property Subject to Limitations,” the policy states that [w]e will not pay for loss:
1. to valuable papers and records, such as books of account, manuscripts, abstracts, drawings, card index systems, film, tape, disc, drum, cell or other electronic data processing, recording or storage media, and other records, caused by any error in programming. But if loss to papers or records, including those which exist on electronic or magnetic media is caused by any other insured loss, we will pay either:
a. the cost of replacing the papers or records with duplicates of like kind and quality, such as prepackaged software programs, if duplicate material is available on the current retail market; or
b. the cost of unexposed or blank material for reproducing the papers or records, if they cannot be replaced with duplicate material of like kind and quality.
Under “Coverage C — Loss of Income,” the policy states that State Farm “will not pay for any loss of ‘business income’ caused by accidental direct physical loss to ‘electronic media and records’ after the longer of’ sixty consecutive days from the date of the loss or the amount of time necessary to repair, rebuild or replace other property at the premises caused by the same occurrence.
In addition to the coverage enumerated in the general provisions of the policy, Lambrecht purchased $100,000.00 of the following “Extension of Coverage:”
Valuable Papers and Records. We will pay your expense to research, replace or restore the lost information on valuable papers and records, including those which exist on electronic or magnetic media, for which duplicates do not exist.
Analysis
In its brief, State Farm argues that the losses alleged by Lambrecht are not “physical” because they are not “tangible,” i.e., capable of being touched or sensed. Other courts have addressed the issue as to whether computer data, broken down to its component “bits and bytes,” is “physical” or “tangible.”
See American Guarantee & Liab. Ins. Co. v. Ingram Micro, Inc.,
According to Ashley’s affidavit, the server, the pre-packaged software, and the data stored on the server were all destroyed as a result of the virus and each of these items had to be replaced. Ashley also stated that the server was the “central computer,” that all other computers in the office used the software that was installed on the server, and that as a result of the virus, the server was “unable to accept, receive or retrieve any information in any form whatsoever and was totally useless as a computer.” In the section of the policy defining coverage for loss of income, “electronic media and records” is defined as
a. electronic data processing, recording or storage media such as films, tapes, discs, drums or cells;
b. data stored on such media; or
c. programming records used for electronic data processing or electronically controlled equipment.
We hold that the plain language of the policy dictates that the personal property losses alleged by Lambrecht were “physical” as a matter of law. Based on Ashley’s affidavit, the server falls within the definition of “electronic media and records” because it contains a hard drive or “disc” which could no longer be used for “elec-fronte data processing, recording, or storage.” 5 The data that Lambrecht lost as a result of data is also covered because it was the “data stored on such media.”
According to the policy, there can be a “loss to papers or records, including those which exist on electronic or magnetic media” that is not “caused by an error in programming.” If such a loss occurs, State Farm will pay “the cost of replacing the papers or records with duplicates of like kind and quality, such as •prepackaged software programs, if duplicate material is available on the current retail market....” (emphasis added). Based on the evidence in the record, the losses were caused by a virus, not an “error in programming.” Therefore, the pre-packaged software Lambrecht lost as a result of the virus is also covered under the policy.
Lambrecht also purchased additional coverage for the “expense to research, replace or restore the lost information on valuable papers and records, including those which exist on electronic or magnetic media, for which duplicates do not exist.” In Ashley’s affidavit, she alleged that “the company incurred additional expenses in employee time to acquire and install a new server and properly reload all of the software in it.” According to the plain language of the policy, these expenses Lam-brecht incurred in replacing the lost data are covered.
*26 By its direct language, the policy covers loss of business income caused by “accidental direct physical loss to ‘electronic media and records’ ” but only that income lost for either sixty consecutive days from the date of the loss or the amount of time necessary to repair, rebuild or replace other property at the premises caused by the same occurrence. Accordingly, the business income Lambrecht lost as a result of the virus is covered under the policy because Lambrecht suffered a loss of its “electronic media and records” during the months of February and March.
State Farm’s contention that Lambrecht did not suffer an “accidental direct physical loss” runs contrary to the language of the policy, which expressly states that it will pay for loss of business income caused by “accidental direct physical loss” to “electronic media and records.” According to State Farm’s argument, the policy would never cover such a loss because the “electronic media and records” and the “data stored on such media” is not “physical.” The plain language of the policy’s provisions and definitions dictates that such property is capable of sustaining a “physical” loss.
Condition Precedent
State Farm also contends that even if Lambrecht was entitled to coverage for its alleged losses, State Farm is absolved of any liability under the policy because Lambrecht failed to comply with a condition precedent under the policy. Under the section entitled, “Duties in the Event of a Loss,” the policy states that the insured must “notify the police if a law may have been broken.” State Farm contends that the injection of the virus into Lam-brecht’s computer violated section 33.02 of the Texas Penal Code, 6 entitled “Breach of Computer Security,” and that since Lam-brecht did not contact the police after the virus was discovered, Lambrecht failed to comply with all necessary conditions precedent under the policy. We disagree.
“Conditions precedent to an obligation to perform [under a contract] are those acts or events, which occur subsequently to the making of a contract, that must occur before there is a right to immediate performance and before there is a breach of contractual duty.”
Hohenberg Bros. Co. v. George E. Gibbons & Co.,
Based upon our analysis of State Farm’s motion for summary judgment, we conclude that State Farm failed to prove it was entitled to judgment as a matter of law. Accordingly, the trial court erred in granting summary judgment in favor of State Farm. Our inquiry does not end there, however, because Lambrecht also filed a motion for summary judgment, contending that it was entitled to judgment as a matter of law.
Was Lambrecht Entitled to Judgment as a Matter of Law?
Based on the assertions contained in Ashley’s affidavit, Lambrecht contends that the losses it suffered were covered by *27 the policy and that it was entitled to judgment as a matter of law. State Farm argues that the losses Lambrecht suffered were excluded from coverage because the losses were not “accidental direct physical losses.”
In order to recover under an insurance policy, an insured must prove that the loss was covered by the policy.
Employers Casualty Co. v. Block,
Conclusion
The trial court erroneously sustained State Farm’s motion for summary judgment because the determination of whether the injection of the virus into Lam-brecht’s computers was accidental must be made from Lambrecht’s viewpoint. After resolving all reasonable inferences in Lam-brecht’s favor and viewing the injection of a virus into Lambrecht’s computer network system from Lambrecht’s perspective, we conclude that such an act was accidental. Furthermore, because the policy defines the type of personal property that Lambrecht is alleged to have lost as a result of the virus and dictates that this property is subject to an “accidental direct physical loss,” the personal property losses are “physical” under the policy. After analyzing whether the policy language regarding contacting the police creates a condition precedent, we hold that such language does not create a condition precedent to State Farm’s duty to pay for a covered loss.
Likewise, when we analyze Lambrecht’s motion for summary judgment and resolve all reasonable inferences in State Farm’s favor, we cannot render judgment in Lam-brecht’s favor because there is no evidence to demonstrate that the losses it suffered were accidental. Therefore, the resolution of the issues in this case rests on disputed facts; accordingly, the trial court erred in granting summary judgment in State Farm’s favor.
See Gramercy Ins. Co.,
We reverse the trial court’s order granting summary judgment and remand this cause for further proceedings.
Notes
. Tex.R. Civ. P. 166a(c).
. Section I, Paragraph 3, Condition provides that in the event of loss, the insured must "notify the police if a law may have been broken....”
. In its brief, State Farm contends that Ashley’s affidavit was not reliable evidence of the cause of Lambrecht's loss because it was not based on any proper foundation. This objection was raised in State Farm’s motion for summary judgment; however, State Farm never obtained a ruling on the affidavit from the trial court. As a prerequisite to presenting a complaint for appellate review, the record must show that (1) the complaint was made to the trial court by a timely request, objection, or motion and (2) the trial court either expressly or implicitly ruled on the motion or refused to rule on the matter.
See
Tex.R.App. P. 33.1. A ruling on a motion for summary judgment does not imply that the trial court implicitly ruled on evidentiary objections.
Rogers v. Continental Airlines, Inc.,
. When an insurer has been sued for payment under an insurance policy, article 21.58(b) of the Texas Insurance Code, places the burden of proof on the insurer as to any avoidance or affirmative defense that must be affirmatively pleaded under the Texas Rules of Civil Procedure. Tex Ins.Code Ann. art. 21.58(b) (Vernon Supp.2003). "Any language of exclusion in the policy and any exception to coverage claimed by the insurer constitutes an avoidance or an affirmative defense.” Id.
. Ashley’s affidavit is the only evidence submitted by either party as proof of the losses it suffered and their cause, namely the virus. Our review of the record indicates that the parties may have tentatively agreed to cease any additional discovery until this court rendered a decision in this matter. State Farm alludes to this agreement in its response to Lambrecht’s motion for summary judgment to support its contention that additional discovery needs to be completed. Even if Ashley’s affidavit could have been "readily controverted,” a sworn motion for continuance must be included in the record in order to preserve any complaint on appeal that additional discovery was needed. Tex.R. Civ. P. 166a(g);
Jaimes v. Fiesta Mart, Inc.,
. Section 33.02 of the Texas Penal Code makes it an offense to knowingly access a computer, computer network, or computer system without the effective consent of the owner. Tex Pen.Code Ann. § 33.02 (Vernon 1997).