I found this from last January.

January 08, 2001 10:00 AM PT by Eric J. Sinrod

It is difficult to forget the hype and concern that preceded Jan. 1, 2000. Many feared that computers, which were designed to read only two-digit years, would interpret 2000 as 1900 and thus wreak havoc across the world.

Companies and governments worldwide spent billions of dollars to combat the Y2K glitch, and legislation was passed to grapple with the avalanche of Y2K litigation that was envisioned.

Thought no catastrophe occurred on New Year's Day 2000, Y2K issues have remained in the news into 2001. Just days ago, it was reported that Norway's high-speed Signatur trains were not able to operate because their electronics were unable to recognize the date Dec. 31, 2000. This problem has been temporarily solved in part by setting the train's computers back to Dec. 1, 2000.

Now that 2000 has come and gone, we can see the insurance industry is the one fighting Y2K -- in court.

The Y2K shield law

As 2000 approached, industry became deeply concerned that it could suffer tremendous losses and face enormous liabilities if the Y2K nightmare scenario unfolded.

Not surprisingly, industry lobbied Congress for legislative protection. Consumer groups opposed efforts deemed to deprive them of their potential rights, and President Clinton vowed to veto early iterations of legislation that he believed would unduly prevent citizens from seeking full legal compensation.

Ultimately, Y2K legislation was passed. It included the ability, under certain circumstances, for defendants to challenge class actions, to remove state cases to federal court and to encourage plaintiffs to proceed with mediation. This legislative climate was designed to foster cooperation among companies in fixing the Y2K problem without fear that such cooperation would be deemed an admission of potential liability.

Some consumer groups remained worried that this so-called "Y2K shield law" would be invoked numerous times by industry, thus helping to stave off billions of dollars in liability to consumers. However, according to government reports, as of several months ago, this law had been invoked in court fewer than 20 times.

Proponents claim the legislation allowed industry to focus on fixing the Y2K problem, and that the few times the law has been invoked is a testament its success. Others argue that the Y2K shield law represents just another instance of special interest groups seeking and obtaining legal favors from Congress. They also point out that it is impossible to know how many times the law has kept cases from getting to court in the first place.

Insurance squabbles

Generally, where there are major economic losses, insurance claims follow. When it was estimated in advance that Y2K-related losses could total billions or even trillions of dollars, there was quite a bit of legal debate as to whether existing insurance polices would cover such losses.

Insurers took the position that the possible fallout from Y2K would not be an insurable "fortuity," because it was certain that the date Jan. 1, 2000, would arrive. Policyholders argued, on the other hand, that whether losses would result from the rollover to Jan. 1, 2000, was not at all certain, and if such losses did occur, they should be covered under their policies.

Upside Today

-- Anonymous, August 02, 2001

Answers

There also was debate between insurers and policyholders as to whether any Y2K losses could be covered to the extent the losses did not constitute damage to tangible, physical property under the policies.

Yet, as it turns out, the feared losses did not materialize. Instead, companies are making insurance claims for the many millions of dollars spent in advance to prepare for the Y2K bug.

Xerox (XRX), Nike (NKE), Unisys (UIS), Kmart (KM) and GTE all have filed lawsuits against insurers seeking coverage for costs incurred to fix the Y2K problem. They are attempting to invoke "sue-and-labor" clauses contained in some policies to argue in favor of coverage.

Insurers have argued that these clauses were not contemplated to fit this particular context, but instead were designed to afford coverage for costs incurred for ship repairs that protect insured cargo from damage. Policyholders have argued that the language of these clauses nevertheless is broad enough to be applicable in the Y2K remediation context.

The remediation insurance stakes are high. Indeed, Xerox alone sought $138 million in court for such expenses from its insurer, American Guarantee and Liability Insurance Company.

A New York judge a few weeks ago ruled against Xerox's case on the ground that Xerox waited too long -- three years -- before notifying its insurer of its claims. The judge ruled that this deprived the insurer the ability to analyze the relevant software and hardware to evaluate on its own how much remediation work was necessary.

This ruling was not on the merits of the sue-and-labor clause argument, and it will be interesting to see how the courts grapple with this issue in other cases.

All hype?

Some people believe that the dire predictions for Y2K were nothing more than hype and hysteria promoted by vendors of Y2K-related services and products. While there is no question that a Y2K cottage industry emerged, it also seems fair to say that the few Y2K problems that did ensue probably would have been greater in number and severity had cooperative efforts not been undertaken to grapple with the issue in advance.

As in any human endeavor, some Y2K efforts were of tremendous value, some were superfluous, and some caused harm. (It turns out some so-called "Y2K-complaint" software was not compliant and damaged other computer functions.)

Technological solutions designed to prevent potential losses should be encouraged. Indeed, the failure to implement such solutions can create legal liability. For example, now that viruses and distributed denial-of-service attacks are fairly common, the failure by a company to prevent the transmission of such viruses or attacks could make that company legally liable to those that suffer damages.

Where there is risk, insurance potentially is available to effectuate a transfer of the risk for a premium price. Indeed, as the world moves more and more online, new insurance products are being offered to cover risks related to the Internet.

In the end, the law will remain an available avenue of recourse to seek legal redress for negligence or wrongs committed on the Internet. Lawyers are creative, and like it or not, they are not going to go away.

-- Anonymous, August 02, 2001