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LONDON-Underwriters have been told that there will be a total in-orbit loss of about $132.5 million for AT&T Corp.'s Telstar 401 satellite, which the company declared permanently out of service last Friday.

AT&T stated that it will work with the Telstar 401 manufacturer Lockheed Martin to find out why the communications broadcast satellite that was launched in December 1993 stopped functioning early last week. AT&T had sued Martin Marietta Corp., now part of Lockheed Martin, for the 1994 loss of the Telstar 402 satellite for alleged failure to correct known defects in Telstar's propulsion system, but the suit was settled out of court (BI, April 10, 1995).

AT&T is insured for $132.5 million for the loss of the Telstar 401 in orbit, sources in the London market say. The coverage is placed in London by Bowring Space Projects, a unit of Marsh & McLennan Cos. Inc. Insurers on the coverage include Lloyd's of London syndicates, La Reunion Aerienne in Paris and ACE Ltd. in Bermuda.

AT&T would not comment on its coverage.

Several major satellite insurers avoided this loss, however, because they stopped underwriting the satellite at renewal last year. This includes the former leader of the coverage, Lloyd's satellite underwriter Simon Clapham, and Italian insurer Assicurazioni Generali S.p.A.

The Telstar 401 carried TV signals for major customers, including networks ABC, Fox and PBS as well as telephone and computer data. But most of the customers were rerouted and no network was forced off the air by the outage. The customers could have ancillary cover of $5 million to $10 million to insure them against the loss of a transponder, satellite underwriters say. But if they were rerouted and there was no loss of signal, the customer would not have a claim, the underwriters said.

AT&T plans to replace the Telstar 401 eventually with the Telstar 5, which is expected to be launched in May.