With January 1, 2000 less than 200 days away, businesses around the world are scrambling to re-align their systems and services to be Y2K compliant. Small Businesses are particularly vulnerable to Y2K failures, says Fred Hochberg, deputy administrator of the United States Small Business Administration. No company is immune from the millennium bug and everyone should have instituted a program to investigate, audit and correct potential Y2K problems before they begin. For resources to correct old systems, funding support may be available through your local Small Business Administration (973-645-6064). The following is a short list of considerations your company already should have made.
Are your essential services systems compliant? If not, your inventory system, elevator, fire sprinkler system, detection system, alarm system, employee payroll and virtually every system dependent on a computer chip may fail. Have you made an inventory of your computer-related hardware, tested the system and established a plan for addressing a potential failure?
Do you advertise that your products or services are "up to date"? If you are not Y2K compliant, this may be misleading.
What happens if an essential delivery is late because your scheduling system, run on a computer chip, malfunctions? Have you instituted manual back ups for your essential systems?
Are your essential supplier's systems Y2K compliant? If not, you may not get timely deliveries come January, 2000.
If you're assured that your sprinkler system will not destroy your inventory on January 1, 2000, have you considered the legal effects the change in the millennium has on your insurance contracts, purchase orders and virtually every agreement executed in the last several years?
Have you read the "fine print" on your purchase orders or contracts? Have you warranted that you are Y2K compliant, or should you be disclaiming compliance because you have not tested all of your systems? Are your clients demanding you assure compliance, not only of your systems, but also those of your suppliers?
Do you have insurance coverage for a failed system? Many carriers are attempting to exclude coverage for a Y2K failure and any resulting consequences. Does the malfunction in your computer system constitute an "unforeseeable event" which affects "tangible property" required to trigger insurance coverage? Has an attorney reviewed your most recent CGL Policy (Comprehensive General Liability) to determine if any coverage exists?
The courts are now addressing the issues of manufacturers' responsibility for failures and insurance coverage in the event of a claim. Many lawsuits are anticipated after January 1, 2000. Early review of your insurance contracts, purchase orders, contracts with customers and vendors, and advertisements may avoid costly litigation next year.
If any of the above alerts or alarms you, we encourage you to confer with your legal advisor to review pertinent business forms and contracts to assure Y2K compliance. The old adage "better safe than sorry" is apropos as we move closer to this Year 2000 adventure.
This Legal Alert was prepared by Patricia L. Dee, Esq., a Shareholder in Capehart & Scatchard's Litigation Department. Ms. Dee also handles trademark, copyright and domain name issues for the firm. She may be reached at 856. 234.6800 or by e-mail at pdee@capehart.com.