Guns? Tobacco? Breast implants? Pocket change, say

Guns? Tobacco? Breast implants? Pocket change, says Jim Anderson, vice president, government relations, at the National Association of Wholesaler-Distributors.

The potential cost of liability suits stemming from Y2K failures is, he says, "larger than all of those put together." Should Y2K cause widespread disruptions, the damages and legal fees generated by related liability lawsuits could top $1 trillion. Thus, the race is on to craft legislation limiting Y2K liability.

The U.S. Chamber of Commerce is working on one proposal, and a number of trade associations, including NAW and the National Association of Manufacturers, are developing their own ideas under the auspices of the Y2K Industry Working Group. The group scored its first victory last October in getting the Year 2000 Readiness and Disclosure Act of 1998 signed into law over the objections of the Association of Trial Lawyers of America.

The act provides a limited amount of protection for companies in issuing two kinds of documents, Year 2000 Statements and Year 2000 Readiness Disclosures. Essentially, the act says that unless it can be shown they were made in bad faith or were misleading, such statements and disclosures cannot be used as evidence in a liability suit.

But despite the act's passage, many companies are still holding their cards close. The trial lawyers association favors current "absolute" Y2K liability, which would allow suits despite any (presumably failed) attempts at remediation or disclosure; business interests like the Y2K Industry Working Group are expected to work for legislation restricting Y2K liability lawsuits and damages. With both sides staring at $1 trillion in damages and legal fees, observers on Capitol Hill predict a battle unprecedented in its ferocity?and sizable campaign contributions.

A number of Y2K liability suits have already hit the courts. In early December, a New York state judge tossed out three class action lawsuits against Intuit, maker of the popular Quicken personal finance software.

Some online banking functions in the Quicken software will be disabled by the Millennium Bug; the suits sought damages based on the problems this would cause. Judge Ira Gammerman ruled that software companies could not be sued before the actual damages had occurred or before being given a chance to fix the problem. Intuit has announced that a fix will be available for free in June.

Also early last month, Cincinnati Insurance Co. filed suit against one of its insured, Source Data Systems. Source is a defendant in a lawsuit brought by Pineville (Ky.) Community Hospital over a $570,000 computer system Source installed in 1995-96 and said was Y2K compliant. But it isn't, and the hospital says it now has to spend $750,000 to $1.25 million on a new system. Cincinnati Financial is seeking a declaration that it has no duty to defend or indemnify Source.

One alternative to a lawsuit is mediation. The London-based Center for Dispute Resolution, an independent, nonprofit organization offering mediation services to business, launched a Y2K mediation platform dubbed the Millennium Accord in Britain last month and said other dispute resolution bodies would launch similar proposals in the U.S., Hong Kong, Singapore and Australia.