Millennium bug hits insurers' pocket

GTE has sued five insurance companies to recover the $US400 million it says it must spend to repair and test its computers for the transition to the year 2000, in a case that tests whether insurers may be held responsible for such expenses.

The telecommunications company sued under three policies it has with Allendale Mutual Insurance, from 1996 to 2000. The primary policy covered "destruction, distortion or corruption of any computer data, coding, program or software," and obliges GTE to "sue, labour and travel" if necessary to protect its property. The four other insurers that negotiated contracts with identical language are Affiliated FM Insurance, Allianz Insurance, Federal Insurance and Industrial Risk Insurers.

Consultants told the New York Times that insurers had 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 $US15 billion to $US35 billion.