US aviation insurer takes millennium bug on board

A major United States airline insurer, moving to ease millennium bug concerns, said its policies would cover commercial airlines if any passengers were injured or property damaged in an accident caused by a Year 2000 computer glitch.

"If it is an accident that would ordinarily be covered, we don't distinguish between a Y2K-generated event and a non-Y2K-generated event," said Tim McSwain, senior vice-president with United States Aviation Underwriters.

The broader insurance industry has generally taken the position that it would not cover most losses related to the millennium bug because insurance covered unexpected losses. This has created some concern that airlines and their passengers might not be covered by the airline's insurance liability policy.

The US Department of Transportation earlier this year raised concerns by warning airlines that they risked operating illegal flights if their passenger, third-party and property liability insurance did not cover the Year 2000 computer bug.

The transportation department's statement came after it learned that Lloyd's of London and other major insurers wanted include a clause in their airline liability policies allowing them to exclude coverage of millennium bug losses. Those exclusions would have allowed the insurers to then "write-back" coverage on a limited basis.

USAIG's policies and the policies of most other airline insurers now carry an exclusion for date recognition problems, including the change to the year 2000 and other potentially tricky dates, said USAU vice-president William Ranieri.

But, he said, the policies then restored the coverage for injuries to passengers and physical damage to the aircraft and passengers' property arising from aircraft accident.

"Invariably the writeback will co-exist with the exclusion," Mr Ranieri said. The clause, however, made clear that the policies did not cover other kinds of damage that were not typically covered under a passenger, third-party, property liability policy. Such damage could include loss of business if an airline's computers did not work or flight schedules were lost.

"If an airline's computers go down so they can't make reservations and can't make flights, we're not going to cover that," Mr McSwain said.

But he said he did not expect the airlines to encounter major problems.

"There may be some sporadic problems with certain local computer applications. But in terms of a worldwide meltdown, I seriously doubt it."