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Microsoft's insurers escape defense payments in antitrust suits

Microsoft will have to pay for its own defense in several pending class action suits, according to a summary judgment in Washington state that says its insurers are not liable for the court costs.

Six insurance companies that provide commercial insurance to Microsoft — American National Insurance Co., Federal Insurance Co., Fidelity and Guaranty Insurance Co., National Union Insurance Co., TIG Insurance Co., and Zurich American Insurance Co. — will not have to pay Microsoft's legal defense fees.

A federal judge originally dismissed Zurich American's lawsuit against Microsoft seeking protection from paying the software giant's legal bills arising from 137 private antitrust lawsuits.

The antitrust lawsuits filed in 38 states against Microsoft stem from the federal court rulings that Microsoft acted anticompetitively in violation of antitrust law. Most of the lawsuits, filed on behalf of consumers, allege Microsoft overpriced its Windows operating software, a charge the software giant denies. Microsoft could lose millions of dollars if even only a few suits are successful, because the private suits are seeking triple damages.

A federal judge originally dismissed Zurich American Insurance Co.'s lawsuit against Microsoft seeking protection from paying the software giant's legal bills arising from the 137 private antitrust lawsuits.

Text from the summary judgment — which was requested by both sides in the matter — states that the claims in class actions against Microsoft "arose prior to the relevant coverage periods." The commercial general liability coverage Microsoft purchased covers personal and advertising injury, which don't apply to the antitrust suits. Microsoft did not seek insurance coverage for its antitrust battle with the United States Justice Department.

Microsoft argued to the court that insurance coverage should be triggered under the "disparagement" clause in the disputed insurance policies because the underlying complaints (the class actions) include "factual allegations" that Microsoft levied disparaging comments at its competitors. The judgment states that "this court declines to find that an insurer is obligated to provide coverage as a result of a semantic overlap between a disputed policy and the underlying litigation."

Zurich originally sued Microsoft in April 2000 in U.S. District Court in Washington, D.C., claiming Microsoft's liability insurance does not cover antitrust issues. Four days later, Microsoft countersued in federal court in Seattle. On June 2, 2000, U.S. District Judge Royce C. Lamberth ruled that Zurich improperly filed its lawsuit. "Zurich filed this preemptive first strike here, before it even advised Microsoft of its decision to deny coverage, in a transparent effort to deprive Microsoft of its choice of forum" to pursue legal claims, Lamberth stated in the decision.

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