Nvidia's insurance company falls out over faulty chips payments

  • In a bizarre turn of events, graphics company Nvidia faces legal action by the most unlikely of parties.

    Its own insurance company doesn't seem to want to pay up for defective chips in notebooks last year. The National Union Fire Insurance Company (NUFI) of Pittsburgh filed a case in a California district court, calling on the court to  make a declaration concerning insurance coverage.

    The filing says that certain claims asserted by Dell, Toshiba, Apple, Quanta, Compal, Asus, Samsung, Fujitsu-Siemens and others may either bring or have brought claims against Nvidia, alleging that graphic processing units (GPUs) designed and sold by Nvidia and used in notebooks have failed.

    These are called in the filing, "chip claims". NUFI says that Nvidia has at different times placed it on notice of such chip claims.

    "Concurrently with, or prior to, placing National Union on notice of the chip claims, Nvidia has engaged in settlement negotiations with the chip claimants and, on information and belief, has agreed to settlements and/or the material terms of settlements with respect to some or all of the chip claims," the filing says.

    But, complains NUFI: "Nvidia has not permitted National Union to participate in Nvidia's negotiations of the chip claims or the determination of any settlement or agreements."

    NUFI alleges that Nvidia won't tell it about the chip claims, and instead has "flooded National Union with technical data" and provided it with details about the GPUs themselves.

    It continues that Nvidia has "cloaked its refusals to provide information under the guise of preserving commercial relationships with the chip claimants." But NUFI says it wants objective, material and non-proprietary information - for example the records of the repairs made.

    This is essential for the insurance company to decide on the claims, it continues.

    The filing then goes into chapter and verse about Nvidia customers. "The chip claims arise out of allegedly defectively designed Nvidia chips G86, G86A2, G84, C51, G72, G72M, G73, G72A3, MCP67 and NV42." On August 6th last year, Nvidia contacted NUFI about a claim by Dell, demanding a defense and idemnity against claims against Dell.

    On 4th September 2008, Nvidia told the insurance customer that Toshiba wanted compensation from Nvidia.

    On the 11th of September 2008, Nvidia told NUFI that Apple was on its case. On the 9th of October 2008, Nvidia sent an email saying that claimants included HP, Quanta, Wistron, Compal and Asus. Then, the following day, Asus and Samsung chipped in.

    A lull followed until Fujitsu Siemens asked Nvidia for damages.

    On the 28th of January, Nvidia gave NUFI a copy of a settlement agreement between Nvidia and Toshiba. The insurance company didn't give its consent to this agreement. The same thing happened on the 30th of January 2009, when National Union was given a copy of an agreement between Nvidia and Dell for $10,000,000. Nvidia has provided other draft settlement agreements between Nvidia and Apple and with other of the claimants.

    So what does the insurance company want? It wants records showing the dates of manufacture of the notebooks concerned; the dates notebooks were shipped to end users; field failures to date; specific dates of repair; which component parts were replaced; any injury to component parts other than the Nvidia chips; and document of settlement discussions as well as Nvidia's estimation of claim exposure.

    So National Union doesn't want to pay up. It wants the court to declare it has no duty to indemnify Nvidia because Nvidia has breached the terms of the agreement.