Opinion
No. C3-02-2222.
Filed September 2, 2003.
Appeal from the District Court, Ramsey County, File No. C5020385.
Paul A. Banker, Thomas C. Mielenhausen, Lindquist Vennum, PLLP, and John B. Berringer (pro hac vice), Edward J. Stein (pro hac vice), Joshua Gold (pro hac vice), Anderson Kill Olick, PC, (for appellant)
Charles E. Spevacek, William M. Hart, Jennifer E. Ampulski, Meagher Geer, PLLP, (for respondent)
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2002).
UNPUBLISHED OPINION
In this insurance-coverage dispute, appellant argues that the district court erred in granting summary judgment to respondent insurance company because the claims made in the class-action suits against appellant allege, at least in part, negligent conduct triggering respondent's duty to defend under its technology-liability insurance policies. Because we conclude the facts in the class-action suits allege intentional conduct, thereby precluding coverage, we affirm.
FACTS
This insurance-coverage dispute arises out of two underlying consumer class-action lawsuits against Compaq Computer Corporation (Compaq): Thurmond v. Compaq Computer Corp., No. 1:99-CV-711 (E.D.Tex.), and Sprung v. Compaq Computer Corp., No. 00-S-909 (D.Colo.). The underlying complaints alleged that Compaq intentionally sold computers that contained defective floppy-diskette controllers (FDCs) and FDC microcodes. According to the complaints, these defective FDCs and FDC microcodes in turn caused the loss of use, corruption, and destruction of data without any prior warning to the user. In Thurmond, the federal district court dismissed the plaintiffs' cause of action under 18 U.S.C. § 1030(g)(D) on federal jurisdictional grounds and declined to exercise supplemental jurisdiction over plaintiffs' remaining state law claims, remanding them for consideration in an appropriate forum. Thurmond v. Compaq Computer Corp., 171 F. Supp.2d 667, 684 (E.D.Tex. 2001). The federal district court also dismissed the Sprung action.
An FDC is an electronic device capable of performing logical, arithmetic or storage functions. The FDC is responsible for interfacing the computer's central processing unit (CPU) with the physical diskette drive.
FDC microcodes are programs, commands, and codes that detect data errors and rewrite or reread the affected data correctly or report the error to the user.
At issue is the coverage provided under three insuring agreements contained in a package policy that St. Paul Fire and Marine Insurance Company (St. Paul) issued to Compaq. The insuring agreements are the: Technology Errors and Omissions Liability Protection (Tech EO); Technology Commercial General Liability Protection (Tech GL); and Technology Umbrella Excess Liability Protection (Tech Umbrella) agreements. Under the Tech EO insuring agreement, only loss caused by an "error" is covered. An "error" is defined as "any error, omission, or negligent act." Specifically excluded is coverage for criminal, dishonest, fraudulent, or other "intentionally wrongful act[s]." The Tech GL insuring agreement covers property damage caused by an "event." An "event" is defined as an "accident," including continuous or repeated exposure to substantially the same general harmful conditions. The Tech GL agreement also provides coverage for any warranty provided with or for a product. Coverage for property damage that the insured "expected or intended" is excluded. The Tech Umbrella insuring agreement mirrors the provisions of the Tech GL insuring agreement, containing the same exclusion for "expected or intended" damage.
After receiving the Thurmond and Sprung complaints, Compaq sought coverage under the package policy issued by St. Paul. In a letter dated November 24, 1999, St. Paul accepted Compaq's tender of defense in the Thurmond action under a full reservation of rights. However, St. Paul noted that "to the extent it may be shown that Compaq knew of [the] defect and failed to take measures to either correct the problem or issue appropriate warnings, there would be no coverage [because] Compaq's conduct would not constitute an 'error, omission or negligent act.'"
The Thurmond plaintiffs filed five amended complaints, and the Sprung plaintiffs filed one. On September 5, 2000, after reviewing the second and third amended complaints in the Thurmond action and the amended complaint in the Sprung action, St. Paul notified Compaq that the claims being made in both class actions were not covered, and also notified Compaq of its intent to withdraw from the defense. St. Paul's denial that it had a duty to defend was based on its determination that: (1) the amended complaints alleged damages arising entirely from "intentional" conduct, which did not constitute an "error" under the Tech EO policy; (2) the amended complaints sought to hold Compaq liable under the Computer Fraud and Abuse Act, 18 U.S.C. § 1030, a criminal statute that requires "knowing" and "intentional" conduct; (3) the injunctive, declaratory, and other equitable relief sought by the plaintiffs did not constitute "damages" that Compaq was legally required to pay; and (4) the amended complaints sought a refund of the purchase price, repair or replacement of the defective computer or component parts, and attorney fees and costs — none of which were covered "damages" as defined by the policy. On May 12, 2001, St. Paul denied Compaq coverage under the Tech GL policy, stating that the complaints did not allege or seek damages for injury caused by an enumerated "personal injury offense" under the policy, and that the policy was subject to exclusions for expected or intended property damage.
On January 11, 2002, Compaq brought a declaratory judgment action in state court, seeking a declaration that St. Paul had a duty to defend the underlying actions. Compaq then moved the district court for partial summary judgment on the issue of St. Paul's duty to defend under the Tech EO, Tech GL, and Tech Umbrella insuring agreements. In response, St. Paul moved the district court for summary judgment under all the insuring agreements. On October 22, 2002, the district court denied Compaq's motion for partial summary judgment and granted summary judgment for St. Paul, concluding that St. Paul had no duty to defend Compaq in the underlying actions. The district court found, as a matter of law, "that the underlying complaints in the Thurmond and Sprung actions allege only causes of action and damages resulting from Compaq's intentional conduct." Because of its decision, the district court did not determine whether data is tangible property, whether the class plaintiffs had alleged bodily injury or property damage as defined in the Tech GL and Tech Umbrella policies, or whether the Tech Umbrella insuring agreement imposes a duty to defend. This appeal follows.
St. Paul also sought a rule 12 dismissal of Compaq's extra-contractual claims for coverage predicated on theories of promissory estoppel, breach of an alleged fiduciary duty, and breach of an alleged covenant of good faith and fair dealing. Compaq does not seek review of the district court's dismissal of these claims.
DECISION I
On review of a summary judgment, this court determines whether there are any genuine issues of material fact and whether the district court correctly applied the law. Burlington N. R.R. v. Comm'r of Revenue, 606 N.W.2d 54, 57 (Minn. 2000). In making this determination, this court reviews the evidence in the light most favorable to the party against whom summary judgment was granted. Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993). The question of whether an insurer has a duty to defend is a legal question subject to de novo review. Metro. Prop. Cas. Ins. Co. v. Miller, 589 N.W.2d 297, 299 (Minn. 1999). Interpretation of an insurance policy and application of the policy to the facts in a case are questions of law that this court reviews de novo. Am. Family Ins. Co. v. Walser, 628 N.W.2d 605, 609 (Minn. 2001).
We begin our analysis by determining the applicable state law. The district court ruled that Texas law was applicable, but noted that Texas and Minnesota law did not differ significantly with respect to the issues involved. In determining the applicable law, we must group the contacts of the two states with the controversy in order to locate the "center of gravity." Bolgrean v. Stich, 293 Minn. 8, 10, 196 N.W.2d 442, 443 (1972). Here, the controversy centers on an insurance package policy with three insuring agreements issued by St. Paul. The insurance package policy was issued in Texas. The insurer, St. Paul, is licensed in Texas. Compaq, the policyholder, has its principal place of business in Texas. Minnesota's only connection to this controversy stems from the fact that St. Paul is headquartered in St. Paul, Minnesota. Under Texas law:
Any contract of insurance payable to any citizen or inhabitant of [Texas] by any insurance company or corporation doing business within [Texas] shall be held to be a contract made and entered into under and by virtue of the laws of [Texas] relating to insurance, and governed thereby, notwithstanding such policy or contract of insurance may provide that the contract was executed and the premiums and policy . . . should be payable without [Texas], or at the home office of the company or corporation issuing the same.
Tex. Ins. Code Ann. Art. 21.42 (1981). The primary contacts in this controversy are centered in the state of Texas. We conclude, as did the district court, that Texas law governs this dispute. We note, however, applicable Minnesota law as persuasive authority to the extent that it informs our analysis and was considered by the district court.
Intentional Conduct
The Tech EO insuring agreement only covers loss caused by an "error," which is defined by the policy as "any error, omission, or negligent act." All "intentionally wrongful act[s]" are excluded under the policy. Appellant argues that the district court erred when it concluded that the Thurmond and Sprung complaints alleged intentional conduct by Compaq and therefore St. Paul has no duty to defend. We disagree.
In deciding an insurer's duty to defend, Texas follows the "eight corner rule," also known as the "complaint allegation rule," which provides that an insurer's duty to defend is determined by the factual allegations in the pleadings and the language of the insurance policy . Trinity Universal Ins. Co. v. Cowan, 945 S.W.2d 819, 821 (Tex. 1997) ; St. Paul Ins. Co. v. Texas Dep't of Transp., 999 S.W.2d 881, 885 (Tex.App. 1999), review denied (Tex. Dec. 2, 1999). An insurer's duty to defend is triggered if the allegations in the pleadings raise a potential for coverage under the policy. Westchester Fire Ins. Co. v. Gulf Coast Rod, Reel Gun Club, 64 S.W.3d 609, 612-13 (Tex.App. 2001). The allegations are to be interpreted liberally. Id. at 613. Any doubts regarding whether the allegations trigger a defense are resolved in favor of the insured. Id.
Under Minnesota law, the insurer may consider not only the allegations of the complaint, but also facts outside the complaint brought forward by the insured, or otherwise known to the insurer, in determining the existence of a defense obligation. See SCSC Corp. v. Allied Mut. Ins. Co. , 536 N.W.2d 305, 311 (Minn. 1995); Haarstad v. Graff , 517 N.W.2d 582 (Minn. 1994).
Minnesota law provides that if any claim is "arguably" covered under a policy, the insurer must defend. Brown v. State Auto. Cas. Underwriters , 293 N.W.2d 822, 825 (Minn. 1980).
To support its claim that the district court improperly granted summary judgment, Compaq seeks to establish that certain allegations pleaded by the class-action plaintiffs alleged that Compaq engaged in negligent conduct.
Thurmond Complaint
Compaq claims that while the class-action plaintiffs alleged that Compaq "knowingly" engaged in certain conduct, the factual allegations in the complaints plead only constructive knowledge, not actual knowledge. Specifically, Compaq argues that because paragraph 22 of the original Thurmond complaint states that Compaq "was aware, or should have been aware" of the alleged FDC problems, the allegation is one of "negligence" on the part of Compaq in the design and marketing of its product. Compaq argues further that, for example, the allegation in paragraph 28(C) of the fifth amended complaint that NEC Corporation (a Compaq competitor) "learned of the virus and ran an advertising campaign to warn the industry" established only what NEC knew, and "suggests" only what appellant should have known, not what it did know. This, too, Compaq argues, is an allegation of negligence.
The language in the fifth amended complaint is altered only slightly to read that appellant "was aware of, or alternatively, should have been aware of . . . ."
St. Paul counters that the overwhelming majority of the factual allegations in the Thurmond complaints allege intentional and knowing conduct; and that the few isolated sentences identified by Compaq concerning the design of the FDCs are insufficient to create a duty to defend. Furthermore, St. Paul contends that the basis of the Thurmond lawsuit was appellant's knowing and intentional distribution — not design — of the defective FDCs.
Although the district court found that the "should-have-been-aware" language of the Thurmond complaints sounded in negligence or unintentional conduct, it concluded that this language could not be read in a vacuum. The district court determined that a reading of the complaints as a whole makes it clear that the phrase was gratuitous and that the plaintiffs were seeking recovery for intentional conduct only. We agree. The original and fifth amended Thurmond complaints comprise over 50 paragraphs. Paragraph 22 is the only paragraph in which anything other than intentional conduct is alleged. The Thurmond complaints repeatedly alleged knowing and intentional conduct by Compaq. The class-action plaintiffs alleged that Compaq "knowingly caused and continues to cause the transmission of the FDC software program, code, and commands"; "[Compaq] intentionally caused and continues to cause damage"; "[Compaq] knowingly caused and continues to cause the transmission of infected FDC and FDC microcode"; "[t]he damage intentionally caused by [Compaq] . . . includes impairment to the integrity and availability of data, programs, systems, and information . . . "; and "[t]he last act of transmission knowingly caused by [Compaq] is the silent and unseen activation of the infected FDC and FDC microcode programmed into the FDC device in the computer."
The class-action plaintiffs point out that NEC Corporation learned of infected FDCs and FDC microcodes in the late 1980s and ran an advertising campaign to warn the industry. The district court reasoned, and we agree, that the class-action plaintiffs alleged that, by clear implication, Compaq was necessarily aware of the problem.
Because the Thurmond complaints are replete with allegations of "intentional" and "knowing" conduct, we agree with the district court that the one assertion that Compaq "alternatively, should have been aware" of the FDC problem fails to support Compaq's claim that the class-action plaintiffs were alleging negligence on the part of Compaq.
Sprung Complaint
Similarly, Compaq argues that the Sprung complaint contained allegations of constructive knowledge, but did not plead facts establishing actual knowledge or intentional misconduct. We disagree.
Like the Thurmond complaints, the amended Sprung complaint repeatedly referred to Compaq's knowing conduct. The complaint included specific subsections devoted to Compaq's "Knowing Transmission of the FDC Microcode Virus and Knowing Transmission of Corrupt Data"; Compaq's "Intentional Access of a Protected Computer"; and "The Damage Intentionally Caused By [Compaq]." Paragraph 49 alleged that "[w]hen multi-tasking came of age, [Compaq] knew both of the presence of the FDC microcode virus and that multi-tasking would trigger the FDC microcode virus's destructive commands." Essentially the Sprung plaintiffs alleged that despite Compaq's actual knowledge of the FDC microcode virus and "safe" alternatives, Compaq knowingly caused and continued to cause transmission of the FDC microcode virus.
Because the Thurmond and Sprung complaints alleged "intentional" and "knowing" conduct on the part of Compaq, the intentional-acts exclusion, as a matter of law, precludes coverage under the Tech EO policy agreement, and St. Paul does not have a duty to defend. Accordingly, the district court properly granted summary judgment.
II
Next, Compaq argues that St. Paul has a duty to defend because the Thurmond and Sprung complaints alleged claims that do not require a showing of intent to support recovery, namely alleged violation of the Computer Fraud and Abuse Act and the warranty coverage provided in the Tech GL agreement. We disagree.
Computer Fraud and Abuse Act (CFAA)
Both the Thurmond and Sprung amended complaints alleged that Compaq violated 18 U.S.C. § 1030 (2000), the Computer Fraud and Abuse Act (CFAA). The amended Sprung complaint specifically alleged violation of section 1030(a)(5), which states:
(a) Whoever
. . . .
(5)(A) knowingly causes the transmission of a program, information, code, or command, and as a result of such conduct, intentionally causes damage without authorization, to a protected computer;
(B) intentionally accesses a protected computer without authorization, and as a result of such conduct, recklessly causes damage; or
(C) intentionally accesses a protected computer without authorization, as a result of such conduct, causes damage shall be punished as provided in subsection (c) of this section.[]
In 2001, this provision was amended as to form by Pub.L. 107-56, § 814(a), with renumbered subsections (a)(5)(A)(i)-(iii).
Compaq relies on United States v. Sablan, 92 F.3d 865 (9th Cir. 1996), which held that the CFAA does not require the government to prove that a defendant charged under section 1030(a)(5) intentionally damaged computer files; the government need only prove that the defendant intended to access a computer without notification. Id. at 868. Compaq theorizes that, under the CFAA, the class-action plaintiffs could have prevailed against Compaq without proving that Compaq knew of or intended any harm.
St. Paul counters that Sablan is inapplicable because it interpreted a version of section 1030 in effect from 1986 to 1994 that addressed a different crime under subsection (a)(5)(A): intent to access a federal interest computer without knowing authorization. Id. at 867. In its reply brief, Compaq argues that the Thurmond plaintiffs did not specify which subsection of the statute was the basis for their claim, because they alleged only that Compaq had violated 18 U.S.C. § 1030.
The Thurmond class-action plaintiffs did not specify the specific subsection of 18 U.S.C. § 1030 that Compaq allegedly violated. But we need not decide whether this omission triggers St. Paul's duty to defend. Section 1030 is a criminal statute. The Tech EO policy specifically excludes coverage for criminal, dishonest, or fraudulent acts. Therefore, because both the Thurmond and Sprung complaints alleged that Compaq committed a crime by violating Section 1030, we conclude, as a matter of law, that coverage is excluded by the policy. Moreover, as St. Paul correctly states, in determining if a claim is covered, the court must look to the factual allegations in the complaint, and not what could have been alleged . See Nat'l Union Fire Ins. Co. v. Merch. Fast Motor Lines, 939 S.W.2d 139, 142 (Tex. 1997). The plaintiffs alleged that Compaq intentionally caused damage. Therefore, it is irrelevant that they could have pursued other theories on which they might have prevailed without proving that Compaq knew of or intended any harm.
Under Minnesota law, if an insured fails to meet its burden of presenting a covered claim through a complaint or extrinsic evidence, an insurer need not speculate concerning facts that may trigger its duty to defend. St. Paul Mercy Ins. Co. v. Dahlberg, Inc. , 596 N.W.2d 674, 677 (Minn.App. 1999), review denied (Minn. Sept. 28, 1999).
Warranty Claims Under the Tech GL Agreement
Compaq also argues that the warranty claims alleged in the Thurmond and Sprung complaints triggered St. Paul's duty to defend under the Tech GL agreement. Compaq claims that computer data are "tangible property" and the loss, destruction, or corruption of computer data, as alleged by the class-action plaintiffs, constitute "property damage." Therefore, Compaq contends, the language in the Tech GL agreement expressly obligates St. Paul to cover "property damage" resulting from Compaq's product, which includes all express and implied warranties of the product. St. Paul counters that Compaq failed to make this argument in the district court and therefore is precluded from raising it on appeal.
A review of the record indicates that Compaq did raise to the district court the issue of whether the intentional-acts exclusion precluded coverage for the breach-of-warranty allegations in the Thurmond and Sprung complaints. Additionally, Compaq argued in its memorandum of law in support of partial summary judgment that computer data are "tangible property." The district court did not decide these issues because it concluded that the intentional-acts exclusion in the insuring agreements was applicable. But because Compaq made these arguments to the district court, they were properly preserved for appeal.
Interpretation of an insurance policy and application of the policy to the facts in a case are questions of law this court reviews de novo. Am. Family Ins. Co., 628 N.W.2d at 609. In construing an insurance policy, we must give all terms used their plain, ordinary and popular meaning, so as to give effect to the parties' intention. St. Paul Fire Marine Ins. Co. v. Nat'l Computer Sys., Inc., 490 N.W.2d 626, 631 (Minn.App. 1992) ( NCS), review denied (Minn. Nov. 17, 1992).
The Tech GL agreement provides coverage for property damage that results from an "event." Property damage is defined as physical damage to "tangible property" of others. Under this agreement, St. Paul is obligated to provide coverage for property damage that results from the policyholder's product. "Product" is defined as any goods or products manufactured, sold, handled, distributed, or disposed of by the policyholder. "Product" also includes coverage for any warranty provided with or for the product.
In order to invoke the Tech GL agreement and the warranty coverage it provides, Compaq argues that data stored on floppy disks are "tangible property." Compaq relies on the case of Retail Sys., Inc. v. CNA Ins. Cos., 469 N.W.2d 735, 737 (Minn.App. 1991), review denied (Minn. Aug. 2, 1991), in which this court held that a computer tape and the data stored on the tape were "tangible property" because the data on the tape were of permanent value and were integrated completely with the physical property of the tape. St. Paul argues that data are not "tangible property" and relies on NCS, where this court held that information misappropriated from company binders was in tangible form because it was put on paper, but the information itself was not tangible. NCS, 490 N.W.2d at 631.
The court compared the computer and tape to a motion picture, where the information and the celluloid medium are integrated. Retail Sys., Inc. , 469 N.W.2d at 737.
Our research of Texas law failed to produce any cases directly determinative of this issue. But the Texas Court of Appeals has held that information is not transformed into "tangible property" simply because the information is communicated by a fax machine, a telephone, a telegram, or a computer. See Axell v. Univ. of Texas, 69 S.W.3d 261, 266-267 (Tex.App. 2002). This determination is consistent with this court's holding in NCS that data are not tangible property. Furthermore, Compaq's reliance on Retail Sys. is misplaced because the data in this case were not stored. In fact, the dispute centers on the alleged inability of Compaq FDCs to retrieve or store data properly onto a floppy disk. Moreover, the class-action plaintiffs made no claim for damages for loss or destruction of data. Compaq argues that the Thurmond and Sprung complaints alleged property damage because they alleged damage intentionally caused by Compaq that included "impairment to the integrity and availability of data, programs, systems, and [other] information . . . ." But the fifth amended Thurmond complaint and the amended Sprung complaint specifically stated that the class-action plaintiffs did not seek damages "for consequential damages as a result of the actual loss or corruption of data."
Furthermore, the Tech GL agreement provides coverage for property damage caused by an "event." An "event" is defined as an "accident." The class-action plaintiffs alleged "intentional" and "knowing" conduct on the part of Compaq. Therefore, even if we were to decide that data stored on a floppy disk are "tangible property," the intentional-acts exclusion prohibits coverage under the Tech GL agreement, and the warranty coverage would not be triggered. Compaq argues that the warranty claims alleged by the class-action plaintiffs could be decided without a finding of intentional conduct. But the warranty coverage is invoked only if there is a valid claim for property damage. Because the class-action plaintiffs alleged intentional conduct on the part of Compaq, the exclusion for damage that the policyholder "expected or intended" precludes coverage under the Tech GL agreement, and no valid claim for property damage exists.
Compaq alternatively argues that if data are not "tangible property" within the Tech GL definition of property damage, then the term is ambiguous so that the issue of coverage should be resolved in favor of the insured. Compaq contends that because the data was expressly excluded as "tangible property" in the Tech EO agreement, but not in the Tech GL agreement, an ambiguity exists. St. Paul counters that the lack of an express description of tangible property in the Tech GL agreement does not make the term ambiguous. We agree.
Whether the language of an insurance policy is ambiguous is a question of law. NCS, 490 N.W.2d at 631. Any ambiguity is to be resolved in favor of the insured. Id. An ambiguity exists when a word or phrase in an insurance contract is reasonably subject to more than one interpretation. Reinsurance Ass'n of Minn. v. Hanks, 539 N.W.2d 793, 796 (Minn. 1995). "Tangible property" is defined in Black's Law Dictionary as "property that has physical form and characteristics." Black's Law Dictionary 1234 (7th ed. 1999). Under this definition, data may not reasonably be interpreted as "tangible property." Moreover, Texas and Minnesota courts have held that information is not "tangible property." See Axell, 69 S.W.3d at 266-267; NCS, 490 N.W.2d at 631. We conclude that the term "tangible property" is not ambiguous.
Lastly, Compaq proposes that the warranty claims alleged by the class-action plaintiffs are covered under the Tech EO agreement. There is no provision in the Tech EO agreement for coverage of warranty claims. Compaq points to cases in Massachusetts and New York for the proposition that warranty claims are covered under an insurance agreement that covers "errors, omissions, or negligent acts." See, e.g., USM Corp. v. First State Ins. Co., 652 N.E.2d 613 (Mass. 1995); Touchette Corp. v. Merchants Mut. Ins. Co., 429 N.Y.S.2d 952 (N.Y.App.Div. 1980). The Tech EO agreement in this case does not specifically mention warranty claims. Nor has Compaq cited any caselaw in Texas or Minnesota to support Compaq's assertion that an insurance agreement that does not expressly cover warranty claims nonetheless provides coverage of such claims. Furthermore, Compaq did not present this argument to the district court. We will generally not consider issues not argued and considered in the district court. Thiele v. Stich, 425 N.W.2d 580, 582 (Minn. 1988). Accordingly, we decline to consider this issue and conclude that St. Paul had no duty to defend the underlying actions under either the Tech EO or the Tech GL insuring agreement.
III
Compaq's final argument is again predicated on its claim that the allegations in the Thurmond and Sprung complaints can be construed to raise a claim of negligence. Compaq contends that the class-action plaintiffs alleged that Compaq failed to adequately protect their computers from FDC defects, despite warnings and recommendations, resulting in extra expense and damage. Compaq argues that these claims suggest negligent, but not reckless or intentional, conduct.
Under Texas law, an insurer's duty to defend is triggered if any portion of a claim is "potentially" within the scope of the policy's coverage. See Westchester Fire Ins. Co., 64 S.W.2d at 612-13. However, Compaq relies on two Minnesota cases. In Ohio Cas. Ins. Co. v. Terrace Enters., Inc., 260 N.W.2d 450 (Minn. 1977), the supreme court held that a contractor's failure to follow the recommendation of an engineering lab and the contractor's own precautions that failed to protect the soil and concrete from the climate exhibited negligent — but not intentional behavior. Id. at 452-53. Unlike the contractor in Ohio Casualty, who intended to reject the engineer's recommendation but did not intend the resulting damage, the class-action plaintiffs here alleged that Compaq knowingly and intentionally distributed a defective product and intended the resulting damage. Therefore, the reasoning in Ohio Casualty fails to support Compaq's claim.
Compaq's reliance on Brown v. State Auto. Cas. Underwriters, 293 N.W.2d 822 (Minn. 1980), is similarly misplaced. In Brown, the complaint alleged that the insured "did strike upon the head and body of [another] and caused the [other person] personal injuries." Id. at 825. The court held that this language was broad enough to include two causes of action, one for assault and battery and the other in negligence. Id. Here, however, the class-action plaintiffs made repeated allegations of "knowing" and "intentional" conduct on the part of Compaq. These allegations can only reasonably be construed to allege that Compaq acted intentionally. See Reinsurance Assoc. of Minn. v. Timmer, 641 N.W.2d 302, 312 (Minn.App. 2002) (concluding that the underlying complaint did not distinguish between intentional and negligent misrepresentation and could reasonably be construed to include both), review denied (Minn. May 14, 2002). We must be guided by the factual allegations asserted in the complaint, not by what could have been alleged. Nat'l Union Fire, 939 S.W.2d at 142. Therefore, we reject Compaq's attempt to read into the Thurmond and Sprung complaints a cause of action that was not specifically pleaded by the class-action plaintiffs.
Because the Thurmond and Sprung complaints alleged intentional conduct on the part of Compaq, and because intentional acts are excluded under the Tech EO and Tech GL agreements, we agree with the district court that St. Paul is not obligated to provide coverage. Therefore, the district court properly granted summary judgment in favor of St. Paul.