LIMITING Y2K LIABILITYPosted On: Sep. 27, 1998 12:00 AM CST
TAMPA, Fla. -- A Florida lawmaker is proposing comprehensive legislation aimed at limiting liability associated with the Year 2000 problem.
State Sen. John Grant, R-Tampa, unveiled a proposal named the Commerce Protection Act of 1999 last week. The bill, which will be taken up when the Legislature convenes next year, would offer legal protection to both businesses and governmental entities that make good-faith efforts to be Y2K-compliant.
Although Y2K liability legislation has been introduced in other states, most bills focused their relief on protecting public entities.
Meanwhile, nearly all states have approved an endorsement that, if adopted, could minimize insurers' liability for the Year 2000 computer bug under existing coverage (see story, page 27).
The Florida proposal coincides with plans by the Risk & Insurance Management Society Inc. "to take a more active role in promoting liability limitation legislation on both the federal and state levels," according to Anne Allen, director-state affairs for RIMS in New York.
"This is the type of initiative we need to get involved with. The scariest thing about Y2K from risk managers' perspective may not be systems failure or lack of coverage but lawsuits, third-party and otherwise. Where does a corporation's responsibility end? What is the chain of liability for such problems? Who will interpret the rules?" asked Ms. Allen.
Under Sen. Grant's proposal, Y2K class-action suits could not be brought against Florida businesses on or after Jan. 1, 2000, unless each member of the class had suffered at least $50,000 in damage.
That limit on class actions would not apply, however, to suits brought against "a manufacturer or vendor of information technology products for damages resulting from the failure of those products to be Year 2000-compliant," according to the bill.
Punitive damages in Y2K suits would be limited to three times compensatory damages under the Grant bill. State agencies would be responsible only for compensatory damages.
Under the bill, the winning party in suits would be entitled to recover "reasonable attorneys fees" and other court costs from the losing party.
However, companies that informed customers by Sept. 1, 1999, that they would not be not be Y2K-compliant despite their good-faith efforts would be exempt from having to bear the plaintiff's legal costs.
The measure would also: provide some immunity for directors and officers for good-faith compliance efforts; require "solution providers" to "maintain liability insurance in an amount that is not less than its annual gross income to cover claims against it by its customers and third parties"; provide antitrust immunity to companies and government agencies that exchange information to solve the problem; and encourage the use of alternative dispute resolution to settle Y2K-related disputes.
"No silver bullet exists, and we are clearly running out of time," Sen. Grant said in a statement accompanying his proposal.