Monday, July 5, 1999

GTE suing insurers
over Y2K costs

Associated Press


NEWARK, N.J. -- GTE Corp. has sued five insurance companies to recover $400 million it says it must spend to repair and test its computers for the transition to the year 2000, setting up a test case for whether insurers may be held responsible for such expenses.

Irving, Texas-based GTE, the parent company of Hawaiian Tel, provides local telephone and wireless services in 29 state and long-distance and Internet access throughout the country.

The telecommunications company sued under three policies it has with the Allendale Mutual Insurance Co. of Johnston, R.I., from 1996 to 2000.

The primary policy covered "destruction, distortion or corruption of any computer data, coding, program or software," and obligates GTE to "sue, labor and travel" if necessary to protect its property.

The contract also said Allendale would contribute to expenses GTE incurred for those efforts, according to the lawsuit filed June 18 in U.S. District Court.

The four other insurers that negotiated contracts with identical language are Affiliated FM Insurance, the Allianz Insurance Co., the Federal Insurance Co. and Industrial Risk Insurers.

The insurers have until July 18 to file their initial response.

Lawsuits like GTE's are not addressed in the Year 2000 liability legislation agreed upon Thursday by Congress, which focuses on limiting lawsuits against vendors over defective products and on potential lawsuits against computer owners.

Consultants told The New York Times last week that insurers have paid some claims for Year 2000 repairs to avoid lawsuits like GTE's.

Estimates of the insurance industry's potential liability for Y2K problems have varied widely. A recent study estimated the costs could run from $15 billion to $35 billion.

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