Insurer battling giant client

Zurich sues to avoid covering Microsoft's antitrust legal bills

April 22, 2000|By BLOOMBERG NEWS

WASHINGTON -- Microsoft Corp.'s primary insurer is seeking to bar the world's No. 1 software company from claiming coverage for the cost of defending a barrage of private antitrust lawsuits.

In a suit filed last month in federal court in Washington, Zurich American Insurance Co., a unit of Switzerland's Zurich Allied AG, asked a federal judge to declare that its general-liability policy does not cover the legal expenses spawned by Microsoft's antitrust woes.

Microsoft has started submitting insurance claims for the cost of defending about 140 private suits.

The suits seek to take advantage of a federal judge's ruling in a landmark government antitrust case that Microsoft illegally protected its Windows computer operating system monopoly from competition.

"Microsoft is trying to shift the economic consequences of its allegedly anti-competitive conduct onto its liability insurers," said Zurich American's lawyer, Thomas W. Brunner. The antitrust claims are "far removed" from the intended coverage under the policy, he said.

Microsoft's legal bills easily could reach tens of millions of dollars. And if the policy applies, Zurich American also might have to pay up to $4 million to cover judgments against Microsoft, Brunner said.

Microsoft says its legal expenses fall squarely under the language of the policy. The software maker is seeking to shift the insurance battle to federal court in its home state of Washington, where Microsoft has filed its own lawsuit.

Zurich American is resisting that move.

"We believe the policy we signed fully covers the costs of the legal expenses," said Microsoft spokesman Jim Cullinan.

The Zurich American policy obligates the insurer to cover Microsoft's legal obligations for "bodily injury," "property damage" and "personal injury." The policy, which does not specifically mention the antitrust cases, covers a one-year period that began July 1.

As Microsoft's primary insurer for that period, Zurich American is obligated to pay for covered expenses, regardless of any other insurance Microsoft has. Microsoft had policies with other insurers for earlier periods, according to the lawsuit.

The private lawsuits claim that Microsoft overcharged for the operating system.

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