Most Likely Y2K Scenario: Nobody Really Knows

Lawyers and the millennium computer bug are about to demonstrate again that it's an ill wind that blows nobody any good. If computers around the world succumb to the bug at midnight on December 31, 1999, nobody really knows what the consequences will be. In a worst case scenario, experts say hospital patients might die if high-tech equipment fails, while power cuts or systems failures might cause accidents on roads, trains, ships or planes. Less dramatic theories have companies failing as crashing computers wipe out databases containing the life-blood of some enterprises. Either way, when the dust settles the search will be on for scapegoats and compensation. Enter lawyers with writs trying to suppress smug grins. Insurance companies, computer software and hardware manufacturers, and health care providers could be their prime targets. The millennium computer bug, otherwise known as Y2K, is the legacy of lazy software writers in the 1980s. They knew that a method of conserving what was then precious and scarce memory by abbreviating dates to two digits - like 87 or 98 - would cripple data processing if not rectified before clocks ticked into 2000. They gambled that the progress of technology would be fast enough to render obsolete this method of using dates. They lost, and the race is on to fix many computer systems and embedded chips before midnight on December 31, 1999. Some estimates from the U.S. have said litigation induced by millennium computer bug failures could lead to claims of up to $1 trillion. Litigation Bulge, Not An Avalanche Andrew Rigby of Tarlo Lyons, a London law firm specializing in technology issues, expects some cases, but probably not an avalanche. "We will see some Y2K litigation, but not the litigation apocalypse that some U.S. commentators have suggested," Rigby said. According to Rigby, the first port of call for litigants will be insurance companies. "There has been a great debate in the insurance industry and this has produced exclusion clauses for Y2K (damage). Insurance companies have been saying 'should we include a disclaimer. But hold on, if we exclude this in new policies are we saying the old ones did cover it?'," Rigby said. Software companies are also likely to come under fire. Mike O'Conor, a lawyer with Bird and Bird, said lawsuits are more likely in the U.S. than Europe. Rich information technology companies will be targets. "In the States they are looking forward to lottery lawsuits. They reckon plaintiffs will hit the jackpot. It's alarming," O'Conor said. "There won't be as many in Europe and the U.K., the system here is less amenable. The likely defendants are those with the deepest pockets; big suppliers and service companies, big IT companies would be the obvious choice for someone to go against," O'Conor said. O'Conor said a British government agency, Action 2000, had already focused attention earlier this year on software companies. In August, Action 2000 said in a statement that companies like the world's biggest software maker Microsoft, Claris Corp. and Intuit Inc. had not provided clear enough information about their software products' ability to withstand infection by the computer bug. O'Conor also felt that insurance companies would be in litigants' sights, as well as company auditors, directors and officers of companies, and solicitors. Alistair Maughan, a London partner with law firm Shaw Pittman of Washington, D.C., sees a big potential for lawsuits in Europe and Britain. "Despite the efforts being made to rectify the problems, systems will crash, software will fail and customers are likely to suffer as a result. At present however it is hard to predict either the volume of litigation, which will result or the likelihood that suppliers of hardware and software will be found liable to compensate their customers who suffer loss," Maughan said. Maughan said litigants in the U.S. are targeting health providers. IT systems with medical, dental or pharmaceutical applications have also been the focus of Y2K cases. "Other likely targets are accounting firms and other professional services firms, corporate officers and directors, and financial institutions," Maughan said. Tarlo Lyons' Rigby said that in this rash of lawsuits, some European companies are more vulnerable than their U.S. counterparts because of a failure of forethought by governments. In the U.S. legislation has been passed - so-called Good Samaritan laws - which allow companies to limit liability to the consequences of Y2K failure. Companies can provide an honest appraisal of their ability to be free of millennium bug infection. If the declarations were not made deceitfully or recklessly, companies will not be liable to damages for Y2K failure. According to Rigby most software licenses are supplied by U.S. companies and the small print says they are governed by U.S laws and jurisdiction. If these software companies have declared their Y2K compliance, European companies will have no grounds for suits if programs fail. "U.K. (and European) companies effectively have no legal remedy. If they want to take action they have to do it in the U.S. and they won't be able to do that. A U.S. company in the U.K or Europe can take action, that can't be right," Rigby said. "U.K. and Europe (governments) have missed the point on this. They are effectively denying legal remedies to U.K. and European companies and individuals," Rigby said. - (Neil Winton, Reuters)