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Bundling up with technology

Jun 05, 2005

Twice bitten: Reduce your risk of year 2000 lawsuitsGarry BarnesY2K, compliance, lawsuits When it comes to the Year 2000 issue, look beyond possible crashing computers and incorrect data. Why? Because if you're a small business owner, you may have an even bigger worry on your hands: Year 2000-related litigation. The Year 2000 issue is a very hot topic in the business world today because of the possible inability of computers to recognize the date change from "99" to "00" (the millennium bug) with the arrival of the Year 2000, or Y2K. Although the coming millennium is still more than six months away, Y2K-related lawsuits have already begun. Recently, both a software maker and medical equipment vendor have been hit with lawsuits for selling products that aren't Y2K compliant. Practically every company in business today with a computer system is susceptible to Y2K- related litigation because of the danger the millennium bug presents. Even if you don't have a computer, you're still at risk because the companies you depend on for materials, supplies or revenue likely do depend on computers. How big is the litigation risk to businesses? At this point, nobody seems to know for sure. But the expected cost to fix the problem is staggering. The Gartner Group, an independent technology research firm, estimates the global price tag for fixing Y2K will be in the $300-$600 billion range. Obviously, with numbers that big, the prospect for lawsuits over "who knew what and when," seems likely. Don't look to the government for relief either. There is talk that Capitol Hill may consider a bill that would restrict most Y2K disputes to contract actions if defendants met certain goals for avoiding Y2K failures. Such a bill would protect companies from having to pay out huge awards for Y2K-related problems. But who knows if the bill will pass? Fortunately, there are some things you can do to minimize your Year 2000-related legal risk. Although not the definitive list, here are some basic steps to consider. *Become Y2K compliant--Make a good-faith attempt to ensure that your computers and other systems are Year 2000 compliant. Not only will this likely decrease your legal risk, but it makes good business sense as well. *Require compliance--Require your vendors and suppliers to provide certification that they are Y2K compliant. In addition, consider asking them to reimburse or indemnify you for any Y2K-related losses you incur as a result of a problem on their end. *Think contingency--Prepare a detailed contingency plan for operating your business in the event a Y2K emergency arises. *Check your insurance coverage--It's been widely reported that insurance companies may deny Y2K-related claims on the basis that the problem was foreseeable. Check your coverage anyway. It may be possible for you to purchase a separate rider to cover Y2K-related losses. *Safeguard your records--Keep hard copies of important records such as accounts payable, accounts receivable, billing statements, etc. *Write it down--Document actions you've taken to prepare for the potential Y2K crisis. This may be an especially important document if you ever face Y2K-related litigation. *Consult a qualified attorney--A good attorney, familiar with the complexities of the Year 2000 issue, should be able to help you assess your potential Y2K risk, qualify and refine the suggestions above, and provide other suggestions on how to mitigate the risk. If the much-anticipated Y2K crisis strikes, it's very likely that litigation will follow. So use the common-sense steps described above in concert with expert legal advice to reduce your chance of being bitten twice by the millennium bug. Garry Barnes is the senior vice president of Community First National Bank in Phoenix, Arizona. He can be contacted at (800) 261-9225.
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