Computer Sciences Corp., an El Segundo, Calif.-based provider of enterprise software solutions to the insurance industry, is embroiled in a dispute with 21st Century Insurance Group.The legal dispute hinges on an alleged failed software installation project that was initiated in 2002. Woodland Hills, Calif.-based 21st Century, which hired CSC Corp. to install the software system, started arbitration proceedings against CSC in Austin, Texas in December for what 21st Century calls "non-performance."
21st Century Insurance commenced proceedings against CSC stemming from CSC's obligation to provide its COGEN and 3r software and other software programs to 21st Century Insurance, the company states. The insurance company is claiming $100 million for the alleged failed project. 21st Century, an affiliate of New York-based AIG, wrote off $37 million worth of its investment in CSC software in its fiscal third quarter.
Spokespeople for both sides would not elaborate on the arbitration while the case was in progress; however, CSC issued a statement on Dec. 10, insisting that the company "will defend itself vigorously in the arbitration proceeding and will seek the recovery of all sums that are due to it."
The statement also explained that CSC provided "state-of-the-art, integrated software systems including database management, workflow, marketing and insurance processing software to 21st Century." The insurer is currently using those systems to process its personal automobile insurance business for customers located in Nevada, Oregon and Washington.
"The software systems are highly customized at 21st Century's direction," the statement continues. Programmers, analysts and managers employed by 21st Century and CSC worked jointly to create the software systems. Critical decisions concerning the direction of the development effort, the project priorities and the allocation of resources were made by 21st Century, according to CSC.
Furthermore, CSC believes that 21st Century can and should implement CSC's software systems to process its personal automobile business in California. Work that 21st Century allocated to itself with respect to that implementation has not been commenced or completed, according to CSC.
The software vendor contends that it has complied with its contractual obligations, and that, with 21st Century's cooperation, the implementation of the systems that 21st Century is using in other states can be successfully completed in California. Despite the arbitration, CSC continues to work with 21st Century to achieve this objective.
CSC disputes claims
CSC asserts 21st Century's arbitration demand is unfounded and that claims asserted by 21st Century are barred or otherwise limited by "the parties' contract, course of conduct and by law." The company contends that any damages, contractual or otherwise, should be limited to modest, non-material sums.
One industry analyst speaking anonymously speculated that the 21st Century case might have implications affecting other insurance software providers in the future.
The analyst states that software providers might be inclined to operate differently in light of this action. For instance, the specter of litigation might prompt a software provider to implement more safeguards within contracts, which in turn could undermine the effectiveness of the services provided.
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