Opinion ID: 3014059
Heading Depth: 3
Heading Rank: 1

Heading: Defective Design Exclusion

Text: The policy provisions outlining 9 Even GTE’s characterization of excluded perils specifically preclude the Y2K problem supports the conclusion coverage for “the cost of making good that it falls within the defective design defective design or specifications.” The exclusion. At argument, GTE’s counsel District Court concluded that “any efforts explained the problem as follows: “It is taken to correct a date recognition the data coming in is in a different format problem within the computer systems, in than was anticipated when the system was order to ensure that the computer systems designed.” Tr. of Argument at 7:13-15 continue to process dates as expected and (emphasis added). In other words, it is the required, are efforts undertaken to correct system’s inability, as designed, to a problem with the design or specification recognize and process the data, and not a of the system.” 258 F. Supp. 2d at 375. problem with the data itself. 13 are true, we still conclude that GTE’s measures fall within the policies’ claim is barred by the defective design exclusions. See 258 F. Supp. 2d at 374exclusion. Industry standards and the 76. Admittedly, some of this testimony is existence of alternative feasible designs confusing.11 Nevertheless, this testimony may be relevant standards in determining supports the view that GTE’s remediation whether there is a “design defect” for the efforts were taken to correct an purpose of tort liability. See, e.g., “imperfection or shortcoming” in the twoRestatement (Third) of Torts: Prod. Liab. digit system, and thus fall within the § 16, cmt. b (1998). The fact that policies’ defective design exclusions. For something was designed in accordance example, in the context of explaining the with “best practice” or industry standard relationship between Y2K and “legacy does not, however, mean that GTE’s migration,”12 Michael Lawrence Brodie, insurance policy provides coverage for who worked as a senior staff scientist and necessary changes and upgrades to that a senior technologist at GTE, testified: system. The premise is you have a The policies in this case explicitly system that has something exclude the “cost of making good in it that you don’t like, and defective design or specification.” you want to get into a state “Defective” is defined as “[a]n where that thing is no imperfection or shortcoming, esp. in a part longer present. You that is essential to the operation or safety migrate from one state to of a product.” Black’s Law Dictionary another state, whether it is 429 (7th ed. 1999).10 Here there was an Y2K . . . or whether its an “imperfection or shortcoming”—the old database system, or a inability of the system to properly read dates on or after the year 2000––in the 11 system’s design or specification. The At argument, the Court attempted District Court pointed to extensive to clarify portions of the testimony of Joel testimony from GTE employees to buttress Cohen, Program Manager for GTE’s Y2K the conclusion that the remediation Program. In the course of this clarification, even GTE’s counsel acknowledged that the testimony is 10 Black’s Law Dictionary “confusing.” Tr. of Argument at 10:13separately defines “defect” and the 20. corresponding adjective “defective” from 12 the term “design defect.” See Black’s Brodie explained that the term Law Dictionary 429 (7th ed. 1999). “legacy migration” “describe[s] the Notably, here the language of the policies transformation of a system . . . from one says “defective design,” rather than using state to an improved state.” Deposition of the tort liability concept of “design Michael Lawrence Brodie at 195:11-15, defect.” J.A. at 2364. 14 code that no longer important, GTE’s very argument is is appropriate . . . . undermined by the plain language of the You’re trying to policy provisions. The defective design change an existing provision expressly provides that the system into a new policy does not ensure “against the cost of form that no longer making good defective design or manifests the specifications.” (emphasis added). p r o b l e m y o u ’ re