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On March 26, the U.S. District Court for theDistrict of New Jersey decided against GTE's claim for a $381 millionreimbursement for Y2K expenses, and granted a motion for summaryjudgment to GTE's group of five insurance companies.
Leadingtelecommunications provider GTE (now Verizon) contended that its $381million Y2K-related remediation efforts were covered under itsinsurance policies. "This was one of the largest and hardest fought Y2Kclaims. Many companies were waiting to see Judge Wolin's Opinion, whichconcludes that there is no insurance coverage for GTE's Y2K remediationexpenses," said William N. Erickson, a partner in the Boston office of Robins, Kaplan, Miller & Ciresi L.L.P.who represented Burbank, Ca.-based Allianz Insurance Co., one of thefive defendants. Judge Wolin based his opinion on two policyexclusions.
The first related to design defect, and the second toinherent vice. GTE disputed that a design defect was the cause of itsY2K problems, but deposition testimony from GTE's own employees led thecourt to find that GTE's two digit year field was an imperfection inthe design of their computer systems. The court then determined thatthe Y2K limitation was also an inherent vice that was similarlyexcluded from the policies. Citing the Port of Seattle v. LexingtonInsurance Co., another Y2K case won by the Robins, Kaplan, Miller &Ciresi L.L.P. firm, the court found the date field problem to be aninternal quality of GTE's computers, and therefore excluded. Ericksonis available for interviews.
Leadingtelecommunications provider GTE (now Verizon) contended that its $381million Y2K-related remediation efforts were covered under itsinsurance policies. "This was one of the largest and hardest fought Y2Kclaims. Many companies were waiting to see Judge Wolin's Opinion, whichconcludes that there is no insurance coverage for GTE's Y2K remediationexpenses," said William N. Erickson, a partner in the Boston office of Robins, Kaplan, Miller & Ciresi L.L.P.who represented Burbank, Ca.-based Allianz Insurance Co., one of thefive defendants. Judge Wolin based his opinion on two policyexclusions.
The first related to design defect, and the second toinherent vice. GTE disputed that a design defect was the cause of itsY2K problems, but deposition testimony from GTE's own employees led thecourt to find that GTE's two digit year field was an imperfection inthe design of their computer systems. The court then determined thatthe Y2K limitation was also an inherent vice that was similarlyexcluded from the policies. Citing the Port of Seattle v. LexingtonInsurance Co., another Y2K case won by the Robins, Kaplan, Miller &Ciresi L.L.P. firm, the court found the date field problem to be aninternal quality of GTE's computers, and therefore excluded. Ericksonis available for interviews.
