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HARTFORD, Conn. -- Risk manager opposition to policy wording that restricts coverage of Year 2000 losses has become more muted over the past nine months.

Connecticut recently became the 49th jurisdiction to approve the exclusions and endorsements introduced by the Insurance Services Office Inc.

Only Maine and Massachusetts have yet to approve the use of at least some of the ISO provisions, which were unveiled in late 1997. The ISO endorsements apply to commercial general liability, commercial property and business interruption coverages (BI, Dec. 15, 1997).

Risk manager reaction to the endorsements was initially negative, as it was seen at the time as an attempt by the industry to exclude valid risks from coverage. However, buyers now say that they do not understand the policy wording to take away coverage of consequential risks presumed to be covered.

"Every time one of these issues comes up, suddenly it's not covered under your CGL policy, and our fear was it could turn into another absolute pollution exclusion," said Anne Allen, director-state affairs for the Risk & Insurance Management Society Inc. in New York. Buyers have extensively challenged the broad application of the pollution exclusion.

The concern among risk managers is that "anytime there's any problem with anything electronic, suddenly it's excluded out of hand as a Year 2000 problem. Of course, you won't be able to tell until the claims start coming in and see how these are applied, but that's our worry," Ms. Allen explained.

"I think the endorsements are to a great extent more clarifications than withdrawals," said William J. Kelly, senior vp at J.P. Morgan & Co. Inc. in New York.

"I don't think the insurance community is saying if a building burns down, and it burns down because a warning system failed because of a Y2K problem," that the consequential loss won't be covered, Mr. Kelly said. "I don't think they're taking away basic physical damage insurance."

Scott K. Lange, director of risk management for Microsoft Corp. in Redmond, Wash., was among those who initially criticized the endorsements.

Now, however, he concedes that insurance companies would be "remiss to their shareholders if they were to leave the door wide open" for all sorts of Y2K-related claims.

Mr. Lange added that the risk has become better understood since last December, as have organizations' responsibilities for dealing with it.

"We have all had to divert attention and resources to fixing a problem that emanates from technology decisions made years ago when modern-day dependence on computers could not have been foreseen. This risk can no longer be described as fortuitous or random in who it will effect," he said.

While Mr. Lange said that the insurance industry should not have to cover losses directly created by the Year 2000 problem, certain consequential losses should be covered.

"I think there will be some consequential damages that will result from a failure no one could foresee. I don't think the insurance industry should abandon its clients under those circumstances. The trillion-dollar question is how do you differentiate between foreseeable and unforeseeable in those circumstances?"

"An insurance company that is trying to please its clients is going to try to come up with wording that will protect its clients against unforeseeable things," Mr. Lange said.