December 19, 2001

Justice Helen Freedman, has ruled that neither Industrial Risk Insurers and American Guarantee & Liability Insurance Co. have a duty to indemnify ITT Industries for its Year 2000 remediation costs. In the case, the Judge held that the Electronic Date Recognition Clause (EDRC) of the policies expressly precluded coverage for Y2K-related costs. The wording here stated that:

"the policy does not insure anyloss . . . arising out of or relating to the recognition, interpretation, calculation, comparison, differentiation, sequencing or processing of data involving one or more dates or times, including the Year 2000, by any computer system."

Further, with this language, and specifically the "ensuing loss exception" in the ERDC, ITT was not entitled to reimbursement under the "sue and labor" clause either. The Judge held that the Sue and Labor clause cannot be used to create coverage for something that was otherwise excluded. The exclusion would otherwise be rendered meaningless. Factory Mutual Insurance Co. remains in the case, having not sought summary judgment.

The Federation

-- Anonymous, December 21, 2001