Nvidia in trouble with own insurance company

Written by Tim Smalley

May 20, 2009 // 2 p.m.

Tags: #case #chips #company #defective #filing #insurance #suit

Companies: #nvidia

The mystery behind Nvidia’s defective chip problem from last year looks to have got a whole lot deeper as its own insurance company recently filed a case in a California court, which asks the court to make a declaration concerning Nvidia’s insurance coverage for the problem.

The National Union Fire Insurance Company (NUFI), a part of AIG, says that insurance claims asserted by Dell, Toshiba, Apple, Quanta, Compal, Asus, Samsung, Fujitsu-Siemens and others may bring or have already brought claims against Nvidia for the defective chips it designed and sold.

NUFI’s filing says that Nvidia has placed its insurer on notice of the claims at different times. “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.

However, NUFI complains that it was left out of these negotiations and alleges that Nvidia won’t tell it about the chip claims. Instead, the GPU maker has “flooded National Union with technical data” and technical details of the GPUs themselves without actually answering the questions set forth by the insurer.

The insurer claims that Nvidia has “cloaked its refusals to provide information under the guise of preserving commercial relationships with the chip claimants.” NUFI doesn’t want technical details and instead wants records and information as to the repairs it has made – it says this information is essential for it to make a decision on the claims.

Where things get deeper is when the filing talks about the chips which Nvidia’s customers have filed claims for: “The chip claims arise out of allegedly defectively designed Nvidia chips G86, G86A2, G84, C51, G72, G72M, G73, G72A3, MCP67 and NV42,” says the filing. That, combined with the list of OEMs filing claims, suggests the problem is quite a bit more widespread than Nvidia first admitted in its 8-K filing last July.

The filing then described the chain of events where the affected OEMs asked Nvidia for damages. Nvidia apparently didn’t consult NUFI before signing agreements with Toshiba, Dell, Apple and the other claimants. NUFI says it didn’t give its consent to any of the agreements drafted between Nvidia and the claimants and will not until it receives the information it has requested.

This includes dates of manufacture of the notebooks concerned; the dates the affected notebooks were shipped to end users; the number of failures to date; specific dates of repairs and details of the work carried out, including any damage caused to parts other than the Nvidia chips; and details of the settlement discussions it has held. NUFI also wants Nvidia’s estimation of the claim exposure.

In short, National Union doesn’t want to pay up with the way things currently stand and it wants the court to declare that it shouldn’t have to pay Nvidia a dime because the graphics card maker breached the terms of their agreement. That’s not good news for Nvidia if the ruling goes in NUFI’s favour.

We asked Nvidia to comment on the allegations set forth in the filing, but the company did not provide one by the time of publication. If Nvidia chooses to comment on NUFI’s complaints at a later date, we’ll let you know. For now though, you can discuss the news in the forums.
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