Are You Ready for the Year 2000?

In our last issue, we detailed the typical year 2000 computer problems that a small law firm might encounter. This issue looks at some areas of potential liability for attorneys created by those computer problems.

A recent article in the Texas Lawyer claims that only "30 percent of (law) firms nationwide have addressed" the year 2000 problem in their own practice. "Countdown to Y2K Compliance: Firms Fire Up For Litigation Frenzy," Texas Lawyer, Vol. 14, No. 8, p. 23 (May 4, 1998). Although we believe attorneys have significantly less exposure to this problem than do accountants or computer consultants, the potential for legal malpractice claims exists.

Law firms should act now to make certain that they will not encounter difficulties resulting from the year 2000 problem..

CRITICAL DATES

Limitation dates in the year 2000 and later should already be entered in calendars. If computerized calendars fail to function properly, an attorney could miss critical dates. Having an attorney and their assistant keep a calendar helps avoid simple human calendaring errors. Such a check may be useless if both calendars depend on software with year 2000 problems.

FAILURE TO ADVISE

Some commentators have noted the potential for legal malpractice claims resulting from failure to advise clients on how to deal with year 2000 issues. The nature of such claims might include:

• Failure to have contract provisions certifying that purchased items have no year 2000 problems. Such situations include purchase and development of electronic equipment or of assets that include such equipment.
• Failure to have contract provisions that assure that key suppliers will not run into delays due to year 2000 problems. Even when a transaction does not involve the purchase of electronic equipment, a supplier may depend on computers to produce items needed by a client. The client may have fixed their own internal problems, but critical suppliers may not.
• Failure to advise clients about potential year 2000 coverage issues in insurance policies. Note that some carriers have discussed including year 2000 exclusions in policies. A number of articles have discussed possible limitations on coverage for year 2000 matters under standard provisions of general liability policies, commercial property policies, director and officer policies, and other similar insurance. Would failure of a critical computer component be "damage to property" that is covered by insurance? Will business interruption insurance apply to year 2000 related delays?
• Failure to disclose clients' year 2000 problems in connection with securities transactions. Third parties might claim that attorneys hid problems that should have been disclosed.

While it is much too early to tell if year 2000 problems will result in serious malpractice claims, it is prudent for attorneys to consider fully the ways in which those problems may impact their operations and those of their clients. If you missed our last newsletter, please check our website or call us for a copy of the article on year 2000 problems on typical law office computers.

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