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
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
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
*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
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)