Various leading insurers are refusing to insure against Millennium bug related loss in new and renewed commercial policies.

The Association of British Insurers have warned that insurers cannot be expected to meet the costs of an event that everyone knows is going to happen. It is therefore vital for businesses to take all possible steps to avoid costly disruption.

Apart from ensuring your own equipment is compliant, the steps being taken by suppliers must also be closely monitored. The terms of all supply contracts should be reviewed and, in particular, software contracts. Ideally contracts should contain an express term that software is Millennium compliant (although case law suggests that in some cases the courts may be willing to imply such a term).

Reluctance to agree to such a term should raise suspicions. Contracts should also be checked for exclusion clauses which seek to exclude a supplier's liability in this regard.

Businesses should ensure that they contact all suppliers asking for assurances that they themselves will be Millennium compliant. This is especially so with small suppliers and those in less developed countries.

If it appears a supplier will not be Millennium compliant, and therefore unable to perform its obligations, this could give sufficient justification for terminating a contract and finding an alternative supplier.

The final point is that company directors may also find themselves personally liable if adequate steps are not taken to ensure that the company is fully prepared for the possible Millennium bug consequences. Positive action is therefore essential.

Jonathan Oxley is a partner with Lee & Priestley solicitors, Bradford.

Converted for the new archive on 30 June 2000. Some images and formatting may have been lost in the conversion.