Microsoft’s captive insurer, Cypress Insurance, has failed in its attempt to recoup $175 million from chip manufacturer SK Hynix, following a federal jury decision in a breach of contract lawsuit in the Seattle.
The lawsuit, which was filed in the US District Court for the Western District of Washington in Seattle, began in 2016, when Cypress, the Arizona-based captive insurer of Microsoft and its subsidiaries, sued SK Hynix in a breach of contract suit to recoup the $175 million that had been paid by insurers to Microsoft.
In August 2004, SK Hynix entered into a contract to supply Microsoft with Dynamic Random Access Memory chips.
Cypress alleged that SK Hynix breached the contract by failing to deliver products in accordance with the agreed delivery schedule, which impacted the 2013 launch of its Xbox One gaming console.
As a result of the issue, Microsoft then secured substitute products at a higher price in order to support its shipment requirements.
These substitutions caused Microsoft to incur damages, and Cypress paid Microsoft policy benefits $175 million as a result of those damages.
The captive’s attempt to recoup those damages failed on 28 March when the jury returned with a unanimous verdict in SK Hynix’s favour, finding that it had not breached the supply contract and rejecting all of Microsoft’s alleged damages.
In August last year, Cypress settled with the State of Washington Office of the Insurance Commissioner for $876,820, after it was issued a cease and desist order in May.
Cypress has been contacted for a comment.
