Allendale Insurance Company Faces $400 Million Claim for Y2K Repairs

Allendale Insurance Company is evaluating whether to pay a $400 million insurance claim filed by telecommunications giant GTE Corp. related to Year 2000 (Y2K) repairs. The claim is tied to GTE's efforts to repair or replace its computer systems to mitigate potential losses due to the Y2K bug. GTE's lawsuit alleges that Allendale has attempted to impose a restriction on its policy, which the company has refused to agree to.

Key Takeaways:

• The claim filed by GTE Corp. against Allendale Insurance Company is for $400 million, related to repairs or replacements of computer systems to mitigate potential losses due to the Y2K bug.
• The lawsuit was filed in response to Allendale's alleged attempt to impose a restriction on GTE's policy, which the company has refused to agree to.
• The "sue and labor" clause in GTE's policy, which calls for insurers to pay for repairs to prevent or minimize losses, is at the center of the dispute.
• Another lawsuit has been filed by American Guarantee & Liability Insurance Co. against Xerox Corp. over a similar "sue and labor" clause.
• The outcome of the policy interpretation will depend on the language of the policy, according to Thomas Segalla, a Buffalo, N.Y.-based insurance attorney.

Statistics:

• The total amount of the claim filed by GTE Corp. is $400 million.
• GTE has spent $400 million to repair or replace its computer systems to make them Y2K-ready.
• The "sue and labor" clause in GTE's policy has no limit for payments and is designed to either prevent or minimize a loss.

Sources:

• BestWire, 1999 (Exact quote from the original source)
• BestWeek (By Theresa Miller, senior associate editor - millert@ambest.com)