Insurer Sues Microsoft over Antitrust Liability

According to published reports, primary Microsoft insurer Zurich American Insurance Co. has filed a lawsuit asking a federal court in the state of Washington to rule that the coverage it wrote for Microsoft does not apply to antitrust claims.

Zurich, a subsidiary of Switzerland’s Zurich Allied AG, is also arguing that it should not have to pay Microsoft’s hefty legal bills. Microsoft has filed a separate suit, asking that Zurich be held accountable for damages arising out of the company’s antitrust suits.

Capitalizing on the Court’s Ruling

On April 3rd, U.S. District Court Judge Thomas Penfield Jackson issued a ruling against Microsoft in a lengthy antitrust suit brought by the U.S. Department of Justice (DOJ) and 19 states in May of 1998. The court said that Microsoft used its power in the industry to “monopolize the Web browser market” to the detriment of competitors.

In its ruling, the court accepted 23 of 26 arguments submitted by the states and declared that Microsoft could be liable under state anti-competition laws.

Insurer Denies Coverage

Zurich is citing Judge Jackson’s ruling in its complaint. According to the Wall Street Journal, the company said, “Remarkably, Microsoft now seeks to shift the resulting economic consequences of its own conduct to Zurich and other liability insurers by demanding that they bear the costs of both defending the antitrust lawsuits against Microsoft and the potential cost of satisfying related judgments.”

In its complaint, Zurich says that Microsoft’s policy “provides no coverage whatsoever for claims arising out of antitrust violations and other anti-competitive activities.”

The Journal is reporting that Zurich’s liability limit is $4 million (US$) for software damages, but that there is no cap on coverage for Microsoft’s legal costs.

Microsoft Moves Forward

Microsoft is defiantly moving ahead, and plans to package Internet Explorer with its Windows Millennium consumer operating system — even though packaging IE with Windows is what landed the company in hot water in the first place.

Microsoft demonstrated the software at a recent trade show and plans to begin distribution later this year. In addition to IE, the new version of Windows includes software that will allow users to download, store and share music, photos and videos via the Internet.

The company reportedly plans to extend its monopoly power to the server market with its Windows 2000 operating system. In a document submitted to federal officials this week, the company’s rivals, which include Oracle Corp., Sun Microsystems, Inc., Linux and Unix, claim that Microsoft 2000 only performs well in an all-Microsoft environment.

Microsoft is claiming that it is merely trying to compete in the server market, and that the antitrust ruling cannot be applied to other products.

Freedom to Innovate?

At the time of the ruling, Microsoft vowed to continue bundling IE into Windows software. The company has even launched a site called Freedom to Innovate (FIN), which encourages citizens to contact their elected officials with their concerns about the Microsoft case.

According to Microsoft, the site is “a non-partisan, grassroots network of citizens and businesses who have a stake in the success of Microsoft and the high-tech industry.”

Microsoft is also taking on the growing PDA market with its new Pocket PC, which will allow customers to connect to the Internet, manage their calendars and play games.

Bugs and Back Doors

Zurich’s lawsuit is not the only bad news Microsoft has received lately. Earlier this week, a bug was discovered in Internet Explorer that could expose a user’s files to prying eyes. The flaw reportedly would let a Web site operator open any files on a user’s hard drive.

Just last week, it was reported that Microsoft engineers built a back door into the company’s server software that makes sites using FrontPage 98 extensions vulnerable to hack attacks.