The year 2000

The Year 2000 problem, or the “millennium bug” as it is sometimes called, arose several decades ago when the memory resources of computer chips were very limited and programmers were encouraged to save disk space by storing the year as a two digit field rather than four digits. As a result many computer systems, as well as electronic equipment containing embedded microprocessors, will be exposed to the risk of malfunctions as their time clocks roll over to one second past midnight on 1st January, 2000 as they will be unable to tell whether it is the year 2000 or 1900. Earlier problems may also be experienced when computers are asked to recognise other dates such as 9/9/99. In addition, there may be problems posed by the presence of the leap year in 2000.

This phenomenon may affect not only the PCs and mainframe computers that support your business, but also the embedded microprocessors in electronic equipment such as fax machines, lift controls and office environmental control systems. Malfunctions in such systems could result in them shutting down or just providing incorrect data. You will appreciate that there is now a very real risk that unless immediate steps are taken to ensure that all your computer systems and electronic equipment is able to recognise the year 2000, substantial losses could be caused to you, and to your customers.

The Club, as your professional liability insurer, must therefore ask you to implement thorough checks of all your computers and equipment by experts to ensure that it is year 2000 compliant. In the event of a claim on you which has resulted from any of your computers or equipment failing to recognise the year 2000, the Club will expect you, in accordance with Rule 3.3, to be able to satisfy the directors that the liability did not arise from a failure by you to take reasonable steps to establish proper systems and controls and to exercise proper supervision. This would include checking all your computers and equipment. At your next renewal the following clause will be included in your terms and conditions:-

“You are insured for your liability and costs arising out of the breakdown or malfunction, by virtue of a failure in electronic date recognition, of any computer programme, system, network, software or equipment, but only to the extent that you can evidence that you have taken adequate steps to ensure that your equipment and/or any equipment for which, although not in your possession or ownership, you may be responsible under the terms of any contract with a principal or other party, is in all material respects compliant. The Directors' decision as to what shall constitute a valid claim in these circumstances shall be final.”

Finally Members should be very careful in connection with letters which they are asked to sign which include a guarantee or indemnity to principals, or others, in respect of any adverse consequences that may arise as a result of the failure on their part, or of any of their sub contractors, to be fully year 2000 compliant. If such letters are received they should be submitted to the Club.

The above is a copy of a circular sent to Members of ITIC in September 1998.