A federal appeals court in Philadelpia has upheld a ruling that GTE Corp., now a part of Verizon, wasn't entitled to millions of dollars in insurance payments over the Y2K computer bug.

The 3rd U.S. Circuit Court of Appeals said five firms that had provided business insurance to GTE in the late 1990s had clauses in their policies that barred the telecommunications company from making claims related to design defects.

Like other companies, GTE spent heavily to correct a widespread bug that made computer clocks and programs unable to read the year 2000. The court estimated that GTE spent $350 million to protect its data and records.

GTE had hoped that some of the cost of correcting the bug would be covered by insurance, but its claims filed with the Allendale Mutual Insurance Company, Affiliated FM Insurance Company, Allianz Insurance Company, Federal Insurance Company and Industrial Risk Insurers were denied.

GTE merged with Bell Atlantic Corp. in 2000 to form Verizon Communications.

Insurance Journal

-- Anonymous, June 24, 2004