NEVADA - Insurer Sued Over Y2K Fixes at Mandalay : LUSENET : Grassroots Information Coordination Center (GICC) : One Thread

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Insurer sued over Y2K fixes at Mandalay Resort Group

Source: The Las Vegas Review-Journal

Publication date: 2000-07-08

By Jan Hogan Gaming Wire Mandalay Resort Group is one of at least four U.S. companies to file suit against a Rhode Island insurer, with each claiming that the insurance company failed to reimburse them for expenses resulting from the repair of potential Year 2000 computer problems.

The gaming company argued in a recent District Court filing that according to the terms of its policy with Factory Mutual Insurance, it should be reimbursed for nearly $6 million it spent to make its hotel-casinos Y2K compliant.

Factory Mutual has refused to pay, according to the lawsuit filed June 26.

"The insurance company's position, as I understand it is, 'You didn't have a Y2K problem because you fixed it,'" said Mandalay Resort Group lawyer Randall Jones. "They say that it's not covered unless it crashed and since it never crashed it's not covered under the policy.

"Whereas Mandalay says, 'Had we not spent this money to fix it, it would have crashed.' It's an interesting issue."

Factory Mutual also faces Y2K-related lawsuits from GTE, ITT Industries and Owens Corning. Y2K is the label that was given to glitches that were expected to arise when computer calendars changed from 1999 to 2000.

In a letter sent in November 1998, Factory Mutual said it would guide Mandalay properties through a Year 2000 self-audit, court papers claim.

Mandalay Resort Group argues that it fixed problems in areas critical to its operations and experienced only minor glitches in noncritical areas, court papers claim.

Jack Pomeroy, Factory Mutual's vice president and general counsel, said he didn't know if anyone from his company did that. But he said it would make sense, noting that the company helps prevent customer losses. "It's in our best interest," he said.

"When you cut through the legalese," Pomeroy added, "the bottom line is the (customers) didn't really think they were buying this coverage and we didn't sell it. What they're claiming, it's not going to fly in any of these cases."

Cheryl Schwartz, a New Jersey lawyer who specializes in insurance cases and represents Mandalay Resort Group, replied, "It's never unusual as part of an insurance company's (stance) to deny claims because of the magnitude of this type of claim."

Pomeroy said about 15 companies - fewer than one quarter of 1 percent of his company's clients - have filed Y2K suits against Factory Mutual. The company insures about 4,500 domestic and international clients.

-- (, July 10, 2000

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