Thank you for sharing!

Your article was successfully shared with the contacts you provided.
A long time ago, in a century far, far away, there was much trepidation about a possible mass disruption because of Y2K damage — the potential inability of computer systems to roll over from 1999 to 2000 and keep operating. It was said to pose disastrous malfunctions for airlines, power companies, banks and so on. But not to worry; the computers did not crash, and the threat turned out to be as harmless as the one that had the Mir space station smashing into a continent instead of the sea. Y2K, however, did leave something behind — the considerable cost of upgrading computer equipment and a question of how to pay for it. Naturally, there were lawsuits. About 20 of them were filed throughout the country, generally in the form of corporations seeking to recover costs from their insurance companies by arguing it was a loss covered under their policies. None of those suits has been won, and last month one of them, which was filed in August 1999 in Delaware, quietly left the dwindling list of those that still are being pursued. The case, Unisys Corp. v. Royal Indemnity Co. et al., voluntarily was dismissed after two intense years of litigation that the insurers’ lawyers say could have cost their clients $35 million and if not for electronic filings, would have generated 8 million to 12 million pages of documents. Unisys, headquartered in Blue Bell, Pa., is a Fortune 500 company that provides information technology and services with 37,000 employees worldwide. It sought reimbursement for Y2K damage from insurers Royal & SunAlliance USA, Insurance Co. of North America and Allendale Mutual Insurance Co., a predecessor-in-interest to Factory Mutual Insurance Co. Lawyers on both sides agree the lawsuit was dropped as a business decision because of the expense, but not on whether Unisys got out over questions it had about the merit of its case. “My strong conviction is they came to see it did not,” said John S. Spadaro, a partner at Murphy Spadaro & Landon of Wilmington, Del., and one of the lawyers for Royal & SunAlliance USA, the lead insurance company among the defendants. Unisys disagreed. “We believed that the claims we were filing were covered as part of our insurance policy,” said Susan Beck, a company spokeswoman. “We still believe it has merit.” Beck noted the case was dismissed without prejudice, so it can be revisited. Like other Y2K lawsuits, this one twisted time, dealing with a high-tech, 21st century problem with ancient, 17th century law, specifically an insurance provision called “sue and labor.” The litigation presented a novel claim, not just in Delaware but everywhere, Spadaro said. The sue and labor clause was part of marine insurance policies, according to “Sue and Labor Coverage for Year 2000 Remediation Expenses,” a 1999 article written by Patrick E. Shipstead, David E. Bland and Scott G. Johnson of Minneapolis-based Robins Kaplan Miller & Ciresi. Under that provision, ship owners were to use every means they could in the event of imminent loss or damage — such as an approaching storm — to protect their property with the insurers required to provide reimbursement, the writers said. Like other plaintiffs, Unisys argued that under sue and labor provisions with its insurers, it should be reimbursed for Y2K expenses. The defendants countered that Y2K damages weren’t “imminent” but something known for years to be coming. “You can’t buy insurance for a known risk,” said L.D. Simmons, counsel for Royal & SunAlliance from Smith Helms Mulliss & Moore of Charlotte, N.C. The Unisys case was one of those opportunities for the Delaware Superior Court to show it can hold its own with complex litigation. That’s a task more generally associated with other Delaware courts — notably the Court of Chancery and by extension, the supreme court, as well as the U.S. District Court with its intellectual property and corporate bankruptcy cases. In fact, Spadaro sees the Superior Court as “something of a hotbed” for this sort of litigation. In recent years his firm has been defense counsel in a number of complex insurance cases involving such plaintiffs as the DuPont Co., Monsanto Co. and Hercules Inc. The Unisys case benefited from case management — first under Resident Judge Vincent A. Bifferato Sr. until his retirement and then Judge Jerome O. Herlihy — and from the appointment of a special discovery master, who was Harvey B. Rubenstein, a Wilmington solo practitioner, Spadaro said. “The Superior Court has met the challenge of this type of litigation in a way you wouldn’t see in other jurisdictions,” Spadaro said.

This content has been archived. It is available exclusively through our partner LexisNexis®.

To view this content, please continue to Lexis Advance®.

Not a Lexis Advance® Subscriber? Subscribe Now

Why am I seeing this?

LexisNexis® is now the exclusive third party online distributor of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® customers will be able to access and use ALM's content by subscribing to the LexisNexis® services via Lexis Advance®. This includes content from the National Law Journal®, The American Lawyer®, Law Technology News®, The New York Law Journal® and Corporate Counsel®, as well as ALM's other newspapers, directories, legal treatises, published and unpublished court opinions, and other sources of legal information.

ALM's content plays a significant role in your work and research, and now through this alliance LexisNexis® will bring you access to an even more comprehensive collection of legal content.

For questions call 1-877-256-2472 or contact us at [email protected]


ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.