This will put a dampener on any company reporting
their problems to be Y2K related :-§

WILMINGTON, Del., Dec. 21 /PRNewswire/ -- A New York State trial court on Dec. 20 ruled for an insurance company which refused to cover $138 million of the money Xerox Corp. (NYSE: XRX) spent upgrading computer systems to cope with potential "Y2K" bug problems. New York Supreme Court Justice Charles E. Ramos granted summary judgment to American Guarantee, a Zurich affiliate, saying Xerox's lack of timely notice of a potential claim was prejudicial and mandated judgment for the insurer.

Justice Ramos also said New York law should apply, given the extent of Xerox's insured property and its corporate presence in the state. Xerox filed a parallel action in Connecticut Superior Court a day after American Guarantee filed this declaratory judgment action in New York. The Connecticut action is pending, but courts generally defer to decisions from other jurisdictions on the same dispute. Early in this litigation, each court declined to dismiss in favor of the other court.

Justice Ramos concluded that the result would be the same whether New York or Connecticut law was applied.

Xerox is only one of about 18 business entities seeking insurance coverage for money spent to avoid four-digit date recognition problems in older computer equipment. It is also the first to have a case decided by a court -- favorably or unfavorably -- although a Washington court has dismissed claims against the Port of Seattle's 1997 insurers as untimely and is considering whether to order coverage by the remaining defendants or dismiss the port's entire case.

Companies involved in Y2K coverage litigation are asserting coverage under provisions covering electronic data equipment and "sue and labor" clauses, which can provide coverage for remedial actions taken to avert a covered loss. Insurers, on the whole, contend that the "sue and labor" clauses don't apply and that Y2K costs were expected and an ordinary cost of upgrading equipment.

Xerox said in its most recent annual report it spent $167 million on Y2K upgrades between 1997 and 1999, not counting software and what it termed routine upgrades.

PR Newswire

-- Anonymous, December 22, 2000