The Y2K Bug: Will Insurance Carriers Be Stung by a Swarm of Claims?
Michael Brady, Geneva Wong Ebisu · Defense Counsel Journal · 1999
It's a safe bet that many insurance claims will be forthcoming after January 1, 2000, but will insureds be able to collect? WHAT IF you woke up on January 1, 2000, and learned that you owed millions of dollars in interest on an outstanding debt of ten dollars? What if you or a family member needed emergency health care but couldn't get it because the computers had crashed at all the hospitals? What if you tried to withdraw money from your bank account and found that your savings balance had been erased? What if millions of businesses and governments worldwide that rely on computers were forced to suspend operations indefinitely because the computers had all malfunctioned on New Year's Day 2000? How about another frightening scenario. What if all the losses resulting from computer malfunction on January 1, 2000, were submitted as insurance claims? Could any insurance carrier survive the onslaught? THE FIX WE'RE IN, AND HOW TO FIX IT If you haven't before given much thought to the potentially catastrophic computer problem--known variously as the millennium the or the Year 2000 problem, your days of apathy are numbered. The Y2K/millennium bug, in a nutshell, is the result of the inability of most computer systems in operation today, if they haven't been fixed, to distinguish between the year 2000 and the year 1900. That deceptively trivial problem has its genesis in the original programming of computers in the 1970s. In those days, computer memory was so precious that programmers elected to use only two digits, instead of three or four, to designate a year. A majority of computer programs and thousands of electronic consumer products in use today still have this programming glitch in their software. Because most computer system memories are date-dependent, those uncorrected systems, when faced with the anomaly of a year with three zeroes, will become confused. They then could come crashing down like the big ball on Times Square at the stroke of midnight December 31, 1999. The fix for these systems is not as simple as one might think. The programming for the date is invariably buried in millions of lines of computer code requiring huge numbers of hours to locate and fix. Because of the enormous number of man-hours required to make most of the computer systems in the country compliant, it has been estimated that nationwide repair costs will reach $227 billion, with about $100 billion of that representing litigation expenses.(1) Worldwide costs to correct the Y2K Bug could reach $400 to $600 billion(2)--not just in business, but also for, among others, problems in government, healthcare, transportation, and communications. Legal costs could easily exceed $1 trillion, with liability arising from the failures of mainframe computers, personal computers and thousands of products containing embedded microchips with the Y2K bug.(3) Skilled programmers fluent in the antiquated programming languages in which most computer code was written are already scarce because these languages are no longer routinely taught. Organizations that have begun seeking a fix for their systems have already snapped up the services of the dwindling number of skilled programmers. It is estimated that many companies, however, even with the specter of catastrophe looming over them, have not even begun to address the problem. As the year 2000 approaches and more information about the Y2K bug is disseminated, only then will many businesses begin to seek a fix. The increasing scarcity of competent programmers, however, will likely result in many companies not being able to obtain a fix for their systems before January 1, 2000. The result? The doomsday scenarios only envisioned now could become a reality. The gamut of damages that could conceivably be attributed to the Y2K problem is virtually limitless in view of the pervasive usage of computers in all aspects of the global society. …