Corrections or additions?
These articles were published in U.S. 1 Newspaper on September 29,
1999. All rights reserved.
Y2K Help Desk: Litigation
What’s up with Y2K and the law? So far the courts are
assuming a spectator’s role on the basis that there’s no proof yet
that Y2K is real, says Stanley Parker, a lawyer in the
headquarters of Buchanan Ingersoll. "Given our proximity to year
2000, my guess is most courts are going to adopt a wait and see
If September 9 (9-9-99) had turned out to be the Y2K dress rehearsal
that many had expected, there might have been more show-and-tell in
the courts. As it turned out, it was quiet day in the information
processing world. Even the pace of Y2K-related litigation has slowed
down, contrary to what lawyers had anticipated. On March 7, the
Inquirer reported that 50 lawsuits had been filed by parties that
jumped the gun on Y2K and were hauling companies into court for
"As of a few weeks ago it was still less than 100, and certainly
far less than many would have anticipated," says Parker, who
a BA from the University of Vermont, Class of 1989, and attended law
school at the University of Pittsburgh.
Of those cases, says Parker, there are two types of Y2K litigation.
"The first are claims by a purchaser of software suing a vendor
for the damages of the upgrade. Those cases by and large have either
settled or been dismissed on the basis that there’s not yet been an
injury," he says. "In many cases the vendors have agreed to
provide the upgrades and that makes sense."
"The second type of law suit that we’re seeing is where companies
such as Xerox have sued their insurance companies to try and recapture
the cost of remediation," says Parker. Xerox spent millions to
ensure that its computer systems were compliant and took its insurance
company to court to cover the cost of preparation using the Sue and
Labor Clause, a maritime clause that is more than a century old. The
clause holds the insurance company liable for whatever is lost in
the effort to save a sinking ship, so to speak. "They haven’t
been utilized much but it’s a creative way for companies to recapture
the money they’ve had to spend to mitigate their damages," says
Parker. "The argument is that if a company is taking steps to
mitigate their Y2K losses, the insurance company should have to pay
The winners and losers it seems will be determined by sheer luck,
which way the wind blows on January 1. "If Y2K turns out to be
a big so what," says Parker, "then I think the insurance
may have the better argument that you took precautions against
that there was no need to take precautions against. If the hurricane
hits us and people who didn’t take precautions have computer failures,
then the argument of the companies who did take steps to mitigate
is certainly strengthened."
That’s no reason to totally ignore your insurance policy, however,
says Parker. "Every insurance policy has to be interpreted on
its own," he says. Businesses should:
there that may cover for Y2K but the more important thing is that
there are policies out there where Y2K and computer failure has been
excluded," he says. "The gray area is going to be where
companies don’t specifically exclude it, but a business incurs losses.
Whether or not they’ll be able to recover depends on the language
of the policy, and how the courts interpret as more and more claims
program illustrates a "good faith" effort to prevent serious
damages that can be used to advantage in court.
Y2K. Surveys indicate that a vast majority of small businesses in
the U.S. have no remediation or contingency plan in place. That
to insurance companies and their clients betting on the same outcome
— two parties driving blind, potentially on a crash course.
— Melinda Sherwood
Some people may plan to stash money under a mattress
or buy cases of bottled water for safe measure, but many members of
the community, particularly elderly and disabled, are unprepared for
the potential fall-out of Y2K, both materially and psychologically.
Grace Polhemus, president of Technology New Jersey, and Rich
Miller, technology columnist of the Times of Trenton, are joining
together to help the Interfaith Caregivers of Greater Trenton, an
outreach ministry to seniors and people with disabilities, learn how
to help members of their congregation prepare for Y2K. "If
goes wrong, where do they go first: they look for the church,"
says Polhemus. "If the church doesn’t understand, then there’s
going to be a panic. The churches and synagogues can play a serious
role, and they can help with the shelters, to help the sick and the
homebound in case they have no power."
Polhemus and Miller will give a free seminar on Y2K preparation for
the 300 volunteers of the Caregivers on Tuesday, October 12, at 6:45
p.m. at the Pilgrim Presbyterian Church at 1599 South Broad Street
in Hamilton. Call 609-419-4444. Says Polhemus: "We want to look
at it as a hope and faith issue, not a fear and panic issue."
Banks, especially, want people to keep the faith.
months ago a banking organization issued a sample homily that it hoped
would be used by the clergy to reassure their congregations. In
proactive move, Summit Bank has announced it will open for business
on New Year’s Day, Saturday, January 1. "We want our customers
to have confidence that on and after January 1, they will be able
to access their accounts and handle their banking business," says
T. Joseph Semrod, chief executive officer. Branches located
in stores will also be open regularly scheduled hours on Sunday,
2. (Sovereign Bank has also announced plans to open certain key
on New Year’s Day.)
Summit also has speakers on Y2K. Call Chandra Johnson at
The Federal Emergency Management Agency (FEMA) seems
like the modern-day equivalent of the Depression’s WPA. Y2K has not
escaped FEMA’s cautionary eye, as evidenced by this recent statement:
"Personal preparedness for transition to the Year 2000 is no
from ways you prepare for the usual storm. Have batteries for
and radios, a three-day supply of water and non-perishable goods,
and at least a half tank of gas. Having recent copies of records and
statements on file at home makes good sense at any time."
For those with Y2K anxieties, FEMA offers a website
plus 24-hour taped information on Y2K at 888-USA-4-Y2K (888-872-4925).
The President’s Council on Year 2000 Conversion has operators standing
by weekdays from 9 a.m. to 8 p.m. to answer questions. Call
As some suggest, the best use of the Internet may simply be as a
Early Warning system. Some ‘net surfers are planning to check out
Asian sites early on December 31, when they are hitting the midnight
hour. If sites in Great Britain are still humming at 7 p.m. Eastern
time (midnight there), that will be more good news. But if we lose
Great Britain, then it’s time to head for the ATM machine — and
For gas and water information, call the Board of Public Utilities
at 800-624-0241 or go to http://www.njin.net/njbpu/index/html.
For banking information, call 609-292-3420. To check with Social
The threat of Y2K has lead to unprecedented growth within the
industry, but where will the thousands of Y2K problem- solvers go
on January 2? Grace Polhemus, president of Technology New
suspects that many of these companies will simply transition to the
next trendy area in the consulting business. "What I’m already
seeing is that the companies are moving and shifting into
she says. "Y2K was a nice way for them to pick up business and
establish a relationship and move into different areas."
E-Commerce is obviously a hot area for those with technology know-how,
but Polhemus says another emerging industry is knowledge management.
"That’s what you see with the big groups, the
and KPMGs," says Polhemus, whose Technology New Jersey works
the Knowledge Management Consortium International, a world-wide
that already has 17,000 members. "They geared up for Y2K and
and now they’re gearing up for knowledge management. They’re coming
out with new methodologies and tools and services every time I turn
around." As long as there’s new technology developed, there’s
never a shortage of jobs for people to fix problems.
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