Lloyd's sought to exclude airline Y2K liability

Patricia Vowinkel

NEW YORK, May 4 (Reuters) - Lloyd's of London made an unsuccessful request last year to exclude coverage of millennium bug problems from its airline liability policies, a senior U.S. Department of Transportation official said.

Lloyd's approached the DOT last summer asking to immediately exclude coverage for all date recognition problems, including the millennium bug, the official said.

Lloyd's, the London association of insurance underwriters, then intended to survey its clients to determine the status of their compliance efforts, he said. If satisfied, Lloyd's then planned to "write back coverage."

The transportation department rejected the request from Lloyd's but then discovered that other airline insurers wanted to do the same thing, he said.

The department met with major airline insurers in December to discuss the issue.

The department in April warned U.S. and foreign airlines that they risked operating illegal flights if their passenger, third-party and property liability insurance did not cover the Year 2000 computer problem.

The Year 2000 computer problem stems from an old programming shortcut that used only the last two digits of the year. Many computers now must be modified or they may mistake the year 2000 for the year 1900, or may not be able to function at all.

Any airline operating without the required liability coverage could face penalties of $1,100 per violation per day for each day that the violation continues, according to a notice sent to the airlines and airline insurers. A carrier's violations could total thousands a day.

The airlines and their officials also could be subject to criminal penalties for knowing and willful violations of the department's regulations, according to the notice.

The transportation department official said insurers appeared to understand the public interest issues involved with the liability coverage and seemed to be willing to comply with the federal regulations.

"I believe the industry would still like to have the exclusion," the official said. "But they recognize that it's not in the public interest to be granting these exclusions," he said.

He said he received a call from one small airline asking if he knew of any insurers that provided Y2K coverage and a call from another small carrier that said its policy had such an exclusion and it was now going to have to buy additional coverage.

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Ray

-- Ray (ray@totacc.com), May 04, 1999

Answers

So, now the insurers go to their reinsurers and say we have to have Y2K coverage. The reinsurers say go find another guy or, your insurance went up 20X. So the the insurance companies say, I am not going to cover you if you are flying...

The DOT has not solved this problem, and the insurance companies are not going to "eat it".

-- noel (ngoyette@csc.com), May 04, 1999.

shhh! that kind of talk is just going to upset the "no big deal"crowd

-- zoobie (zoobiezoob@yahoo.com), May 06, 1999.