|Posted on Monday, December 13, 1999 - 9:31 am: |
02:05 PM ET 12/12/99
Insurance Cos. Target for Y2K Suits
Insurance Cos. Target for Y2K Suits
By MICHAEL WHITE=
AP Business Writer=
LOS ANGELES (AP) _ Insurance companies could wind up the big
losers in the worry over Year 2000 computer glitches, whether or
not the millennium bug actually strikes Jan 1.
In recent weeks, four big companies and two local government
agencies have filed multimillion-dollar lawsuits against their
insurers to recoup the cost of upgrading computer systems. Others
are waiting in the wings with claims, attorneys say.
Xerox Corp. has sued its insurer for $150 million in Y2K
remediation costs. Nike is seeking reimbursement of an estimated
$110 million layout for Y2K preparations.
Others that have sued are Unisys Corp., GTE Corp., the Port of
Seattle and the Royal Oak, Mich. School District. The lawsuits,
filed since July, altogether seek about $700 million from insurers.
Ultimately, insurance companies could face hundreds more
lawsuits seeking repayment of much of the estimated $100 billion
spent in the United States to prepare computers and chip-dependent
devices for the turn of the century.
``They're going to end up paying a huge amount in attorneys
fees, if not a huge amount in settlements,'' said Ron Weikers, a
Philadelphia attorney specializing in Y2K litigation. ``I think
you're going to see a lot of these cases.''
Insurance industry attorneys contend that the plaintiffs are
basing their cases on a shaky legal argument rooted in 19th century
maritime law that encouraged ship owners to make emergency repairs
when away from home.
Insurers were willing to bear the cost because repairs were far
cheaper than the cost of replacing a ship and cargo lost at sea.
Unlike an emergency on the high seas, businesses have known for
years about the potential of Y2K glitches, said Jack Pomeroy,
general counsel for FM Global, a Rhode Island-based insurer
targeted in the Nike and GTE lawsuits.
``There are lots of reasons why this isn't covered,'' he said.
The lawsuits are unique among the estimated 85 Y2K actions filed
in the United States so far. Most other lawsuits accuse software
companies or programers of providing products that are likely to
fail on or after Jan. 1.
Many of those have stalled in court because actual damage hasn't
occurred yet and isn't likely to until after New Year's Day
Filings also have slowed as a result of federal legislation
approved in July that gives businesses 90 days to fix computers
that break down. The measure limits class action lawsuits.
``Those things have had a dampening effect on the filings.
Beyond that, I think a lot of people just haven't suffered a lot of
losses,'' said Bruce Webster, a PricewaterhouseCoopers director who
has testified before Congress about Y2K problems.
The insurance lawsuits differ because they don't hinge on
whether any actual damage ever occurs.
For insurance companies, the lawsuits based on the so-called
``sue and labor'' clause inserted in many large commercial policies
amount to a sort of boomerang. The purpose of such provisions,
which reimburse the insured for prevention of loss of property,
ultimately is to protect the insurer, not the insured.
``They are misapplying this particular clause,'' said Dan
Zielinski, a spokesman for the American Insurance Association,
which represents 370 commercial property insurers.
``It's disappointing, but we, the industry, have a very firm
legal position,'' he said.
Insurance companies contend that Y2K-related problems are not
the result of unforseeable events, like a broken mast, but a
deliberate decision by computer programmers. The two-digit system
was adopted decades ago to save computer memory space.
``This is not a defect,'' said Zielinski. ``This equipment is
operating as it was intended. They're upgrading what may be
obsolete equipment. That is not insurable.''
The problem stems from the practice of using two digits to
represent a year in computer programs. The fear is that computers
and other equipment that depends on microprocessors will misread
the ``00'' that will pop up to represent the year 2000 as 1900 and
systems will malfunction.
Companies and government agencies have tried to correct the
problem by having programmers review computer codes and fix the
Some problems already have cropped up. In 1997 Produce Palace
International in suburban Detroit won a $260,000 settlement after
its equipment crashed while trying to process a credit card set to
expire in 2000.
In Maine, a glitch caused the motor vehicle department to
classify 2000-model autos as pre-1916 ``horseless carriages.''
More small-scale breakdowns are likely despite the best efforts
of programmers to cull through computer codes, said Bernie Reiter,
a programming consultant based in Boulder, Colo.
``Jan. 1 will be quiet. It's a holiday,'' she said. ``It's going
to happen further down the line.''
|Posted on Saturday, December 04, 1999 - 2:39 pm: |
R.D., Your point is well taken. As a matter of fact, the best estimate of scholars who study such things believe Jesus was born about 4 B.C. Since the calendar we use purports to be based on the birth of Jesus, it is four years off and the second millenium dawned on January 1, 1997 with no fanfare whatsoever. But in the final analysis, when the millenium actually starts is not as important as when people think it's going to start. If someone had made a business interruption claim on 01/01/1997 due to the dawning of the millenium, that business owner would have been summarily denied. If they make the same claim after 01/01/2000 I assume they will be taken seriously. As my good friend, Dr. Alan Padgett, (PhD in God and Time, Oxford University currently professor at Asuza Pacific) says "2000 aint nothin' but a number." How people choose to react to the number is what's important. Like Russ, I plan to be home with Rachel and the two youngest members of Ebner Adjusting (Melanie, 17, photographer extraordinaire, and Michael, 13, mounter of photos deluxe and most excellent inputter of data). We can watch the fireworks from first night Erie from the rear deck. But, of course, we will be ready to head out on January 2 or 3 if needed, (or before in the wake of a significant freeze event) depending on the assignment. I have a feeling there will be some coverage questions concerning some of the Y2K claims submitted and really have no desire to get tangled in a morass of claims the likes of which few insurance policies has been written to anticipate. I have been seeing attorneys advertise for the last six months that they are prepared to handle Y2K related claims. I'm not sure how many creatively manufactured-by-attorneys claims I would want to handle without a guarantee of a healthy per diem rate.
|Posted on Saturday, December 04, 1999 - 9:21 am: |
The Truth About The NEW Millennium
Here is some information that may be worthwhile in your determinations to when the "New Millenium really begins".
According to the U.S. Naval Observatory,
the end of the second millennium and the beginning
of the third will be reached on January 1, 2001.
This date is based on a calendar created in 526 A.D.
by Dennis the Diminutive, the head of a Roman monastery
who forged a common calendar from the divergent dating
systems of his day.
To read more about it please go to:
SO IF, the US Navy is correct we are one (1) year early in our concerns and can worry for naught, or we have a year to fix it, whatever.
|Posted on Saturday, December 04, 1999 - 8:33 am: |
I didn't take any chances. I got a new cat that is guaranteed Y2K compliant! Seriously, if anyone wants to be that way, Claimsmag.Com has an interesting article entitled "The Ecomomic Loss..." Personally, I like Russ' idea of just holding someone you love--in my case it better be my wife or I won't have ANY worries about Y2K!
|Posted on Friday, December 03, 1999 - 9:54 pm: |
Lord Acton, I hope my dog doesn't find out he may stop going hunting with me.
|Posted on Friday, December 03, 1999 - 6:52 pm: |
Just so you know, I am spiritually prepared for the second coming of Elvis! Like they said in the movie 'Men In Black', "He's not dead, he just went home." Thank you very much.
|Posted on Friday, December 03, 1999 - 6:19 pm: |
Russ, I just hope your wife doesn't found out!
|Posted on Friday, December 03, 1999 - 4:04 pm: |
Steve, we all saw what just one per cent of the protestors did at the recent World Trade Conference. I believe that most of us will have our toddy then go to bed and bring in the new year holding someone we love.
|Posted on Friday, December 03, 1999 - 2:11 pm: |
Left an unfinished sentence in the last post (not unlike this sentence). It should have said, "either using the dawning of the new millenium as an excuse to "let the party get out of hand" or going into the celebration with the intention of causing the party to get out of hand. Thank you for your indulgence.
|Posted on Friday, December 03, 1999 - 1:47 pm: |
We're in the last month now before the dawning of the year 2000. I wondered how many of us wanted to play Nostradamus and venture a guess as to what types of claims might be engendered by the advent of January 1st, 2000. The first computer glitch I've heard of happened recently in Philadelphia when thousands of people were summoned to jury duty on January 3, 1900. Boy are they in trouble when they show up 100 years too late! Of course, since I am throwing down the gauntlet here, I must also venture my guess. I believe that, by far the worst events of 01/01/2000 will not be generated by computers, but by people either using the dawning of the new millenium as an excuse to "let the party get out of hand." My guess for where civil unrest is most likely to break out? Waco, Texas and Manhattan (New York not Kansas). I might also want to stay indoors if homebase were Anaheim California or Orlando Florida as well. Who knows what plots might be hatched by the crowds flocking to see The Mouse on New Year's Eve. What are your predictions?