Court rejects Y2K coverage claims
By Jeffrey P. Downer

Expenses incurred in upgrading a computer system to avoid Y2K problems are not covered under first-party insurance policies, the Washington Court of Appeals recently held.

In Port of Seattle v. Lexington Ins. Co., no. 49640-9-I-7 (May 2002), The Port of Seattle incurred expenses to upgrade its computer network to avoid Year 2000, or Y2K, complications. The software and operating systems of that network contained a two-digit field code to denote the number of the current year. The Port, like millions of other computer users, were concerned that as year 1999 rolled over to 2000, their computers would not work properly because they would treat the year 2000 as the year 1900. As a result, the Port incurred substantial expense in the mid- to late 1990s to reprogram its computers to contain a four-digit field code.

The Port sued several of its first-party insurance carriers to obtain coverage for its Y2K expenses, based on various policy provisions. The trial court dismissed the action on summary judgment, and the Port appealed.

First, the Port alleged coverage under the "Data Processing Media" coverage of its policies. That provision covered "loss of computer resources" due to a "computer virus." Because the policies did not define these terms, the Court of Appeals looked t their ordinary, dictionary definitions. The court disagreed with the Port that a computer "virus" was like a biological "virus" that is the "causative agent of an infectious disease." On the contrary, several dictionaries contained definitions of "computer virus," consistently defining that term as a computer program that is "hidden within another seemingly innocuous program that usually performs a malicious action."

Under this definition, the Y2K flaw differed from a computer virus because it "was merely the result of an original programming decision. It was not infected by anything external nor was it communicable" and unlike a typical computer virus did not replicate itself.

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