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Insurance Company Might Be Liable for Y2K Remediation Expenses
Description A New York court denied a motion to throw out a case brought by Xerox against an insurance company that issued a policy covering certain losses due to software problems. While the federal Y2K Act did not apply to this case, the matter would proceed to trial to determine if the insurance would cover Xerox's costs.
Topic Cyberlaw
Key Words Y2K Act; Insurance
C A S E   S U M M A R Y
Facts AGL, an insurance company, issued insurance to Xerox that covers "all risk of direct physical loss of or damage to property described herein... [including] any destruction, distortion, or corruption of any computer data, coding, program or software except hereinafter excluded." In March of 1999, Xerox submitted a claim under the policy for its Y2K "remediation expenses and/or damages." AGL sued Xerox, asking the court for a declaration that Xerox is not entitled to coverage under the policy.
Decision Motion denied. The Y2K Act does not apply to this case; it was developed as a federal response to the prospect of increased litigation resulting from computer failures attributable to the inability of computers to process date-sensitive data in the year 2000. Whether or not AGL would be liable for some of the costs incurred by Xerox in remediating Y2K problems is not clear and may be subject to litigation.
Citation American Guarantee and Liability Insurance Co. v. Xerox Corp., 703 NYS2d 661 (Sup. Ct., N.Y., 1999)

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