The case concerned Tektrol Limited, a provider of energy saving
control devices for industrial motors, and the source code for the
software upon which these devices relied.
Tektrol had taken precautions to protect its code. It was held
at its business premises on two computers and also as a hard copy
that was stored in a pilot case; it was held at a remote site
operated by an independent company, Compwise Systems; and it was
also stored on the laptop of its Managing Director, Mr
Shlaimoun.
But in December 2001, disaster struck. Mr Shlaimoun opened a
Christmas e-card and triggered a mass-mailing computer virus. The
virus wiped the source code from his laptop. Believing the remote
site's computer to be secure, Shlaimoun loaded its backup source
code onto his laptop.
A few weeks later, burglars entered Tektrol's business premises
and stole the two computers and the hard copy of the source code.
Only then was it discovered that the virus had also corrupted the
remote site's computer – meaning all copies of the source code were
lost.
Tektrol claimed on its insurance for the business interruption
caused by the losses. However, the policy excluded, among other
things, consequential losses resulting from the erasure, loss,
distortion or corruption of information on computer systems. It
also excluded consequential loss for theft. And the Honourable Mr
Justice Langley found that the exclusions applied to Tektrol's
claim.
"In my judgment," he wrote, "whether as a matter of 'instinct'
or on the basis of an increased risk of loss, in the context of
this policy both the virus and the burglary are properly to be
described as causes of the consequential loss (business
interruption) claimed by Tektrol."
