Insurers to escape massive 'Love' bill

NEW YORK, 6 May 2000 - Insurers won't be footing the bill for the estimated $10 billion of damage caused by the 'Love Bug' virus and its variations, they said on Friday, because most companies don't have special coverage, and the ones that do probably escaped serious damage.

``Although it's the early stages, I don't think we'll see any claims,'' said Robin Furber, head of the Cyber Risks Practice at Willis Corroon Group Ltd., the world's No. 3 insurance broker: ''But that doesn't mean that our clients won't have had financial losses of some sort.''

The 'Love Bug' virus, which hits electronic-mail systems around the world on Thursday and continued to plague systems on Friday in new incarnations is causing $1 billion to $1.5 billion of damage a day, said Computer Economics analyst Samir Bhavnani, with the total cost possibly reaching $10 billion.

Major U.S. business insurers, including American International Group and St Paul Cos., had not received any virus-related claims by Friday afternoon, a spokeswoman from the Insurance Information Institute said, although claims might emerge over the weekend.

Insurers were not likely to have a big payout because specialized virus policies are still in their infancy, Furber said, and while 99 percent of banks and other key financial institutions have special computer crime polices, their mainframes were well-isolated, and damage is not likely to exceed the $5 million - $10 million starting point of most large policies.

Furber said he didn't see any major claims from Melissa, the similar virus which hit e-mail systems in March last year, only some small clean-up claims.

Claim away, says attorney
``The policies offered to most U.S. businesses include business interruption,'' said Kirk Pasich, an attorney at a Los Angeles law firm and an expert in insurance coverage disputes, in a telephone interview with Reuters: ``Those policies cover all risks that are not expressly excluded -- and even if you are not 100 percent sure that your policy covers this kind of event, you need to notify your insurance broker or insurer as soon as practicable.''

``I'm not surprised if insurers say no to claims, but simply taking no as an answer is not the right approach,'' said Pasich, who has litigated several cases against insurers denying coverage.

Next week could see a welter of lawsuits and insurance claims as companies seek to recover money lost on downtime and cleaning up their systems.

``I would not be surprised if at this point next week there have been a bunch of lawsuits by people saying you sent me a virus, or your directors and officers should have done this or that -- or against Microsoft saying you should have designed your software better,'' said Pasich.

Melissa on steroids
``Is it covered? Absolutely - it's an insured event,'' said Ty R. Sagalow, leader of AIG's recent entry into the Internet and e-commerce liability insurance market. ``These types of viruses are a major reason companies need to buy my policy.''

None of his six policyholders had yet notified him of any claim, Sagalow said. AIG's special new policies would cover virus damage, though traditional policies would not, he said.

``Melissa didn't do a lot of damage per se,'' said Sagalow, ''but this virus is Melissa on steroids, and it has not stopped causing a tremendous amount of damage''.

The likelihood of companies filing negligence suits against others who sent them the virus was great, he said.

``If you don't know who the original crook is, but you know who sent you the virus, even inadvertently, there's nothing to stop an attorney starting a case alleging good, old-fashioned negligence, for not having anti-virus software,'' Sagalow said.

``It's a nasty thing to do, but its only a matter of time,'' he added.