New York judge rules against Xerox in Y2K insurance case : LUSENET : Grassroots Information Coordination Center (GICC) : One Thread

Friday, Dec. 22, 2000 2:31 pm PT New York judge rules against Xerox in Y2K insurance case

By Lee Copeland, Computerworld

A NEW YORK state court judge this week dealt a setback to Xerox's attempt to recoup $183 million in Y2K remediation costs, issuing a judgment supporting arguments by the company's insurer that Xerox waited too long to file its insurance claim.

Justice Charles E. Ramos, who presides at a commercial trial court in Manhattan, approved a request for a declaratory judgment against Xerox that was submitted last year by Schaumberg, Ill.-based American Guarantee and Liability Insurance. In his ruling, which was handed down on Wednesday, Ramos agreed with American Guarantee's assertion that Xerox failed to notify the insurer of its Y2K-related losses in the time allotted for filing claims.

Both companies are organized under New York state laws, which require insurers to be notified of potential losses within 60 days. Stamford, Conn.-based Xerox began its year 2000 remediation work in 1996, but it did not file a claim with American Guarantee until March 1999 -- a gap that Ramos said constituted a lack of timely notice.

"In this instance, notice was not given until years had passed and over $100 million had been spent on remediation," the judge wrote in his ruling. Ramos works at the Supreme Court for New York County, which is part of the statewide trial court system in New York. It is not the highest court in New York, which is known as the Court of Appeals.

American Guarantee sought the declaratory judgment against Xerox in New York in July of last year, just one day before Xerox filed a lawsuit in Connecticut claiming that the insurer breached its contract and should be compelled to cover the company's Y2K costs. The Xerox/American Guarantee dispute was one of about a dozen legal battles that emerged last year between companies and their insurers over the tab for year 2000 fixes. Other companies that filed suits similar to the one prepared by Xerox include GTE, Kmart, and Nike.

Xerox's suit is still pending in a state court in Norwalk, Conn. But Ramos also ruled that New York law should apply in the dispute, which could effectively end the Connecticut case. Xerox officials declined to comment on the matter. Sources close to the company said it's considering an appeal of Ramos' ruling but may wait to see how the Connecticut court acts.

-- Martin Thompson (, December 23, 2000

Moderation questions? read the FAQ