Insurer Sues Microsoft Over Payment of Trial Expenses

Microsoft Corp.’s primary insurer is seeking to bar the world’s No. 1 software company from claiming coverage for the cost of defending a barrage of private antitrust lawsuits.

In a suit filed last month in federal court in Washington, Zurich American Insurance Co., a unit of Switzerland’s Zurich Allied, asked a federal judge to declare that its general-liability policy doesn’t cover the legal expenses spawned by Microsoft’s antitrust woes.

Microsoft already has started submitting insurance claims for the cost of defending about 140 private suits. The suits seek to take advantage of a federal judge’s ruling in a landmark government antitrust case that Microsoft illegally protected its Windows computer operating system monopoly from competition.

“Microsoft is trying to shift the economic consequences of its allegedly anti-competitive conduct onto its liability insurers,” said Zurich American’s lawyer, Thomas W. Brunner. The antitrust claims are “far removed” from the intended coverage under the policy, he said.

With high-priced law firms such as Sullivan & Cromwell and Sidley & Austin representing Microsoft, the company’s legal bills easily could reach tens of millions of dollars. And if the policy applies, Zurich American also might have to pay up to $4 million to cover any judgments against Microsoft, Brunner said.

Microsoft says its legal expenses fall squarely under the language of the policy. The software maker is seeking to shift the insurance battle to federal court in its home state of Washington, where Microsoft has filed its own lawsuit. Zurich American is resisting that move.

“The reason why companies such as Microsoft get such insurance policies is for situations such as this,” Microsoft spokesman Jim Cullinan said. “We believe the policy we signed fully covers the costs of the legal expenses.”

The Zurich American policy obligates the insurer to cover Microsoft’s legal obligations for “bodily injury,” “property damage” and “personal injury.” The policy, which doesn’t specifically mention the antitrust cases, covers a one-year period that began July 1.

As Microsoft’s primary insurer for that period, Zurich American is obligated to pay for covered expenses, regardless of any other insurance Microsoft has. Microsoft had policies with other insurers for earlier periods, according to the lawsuit.

The private lawsuits, filed on behalf of both individual consumers and companies that purchased copies of Windows, claim Microsoft overcharged for the operating system. A number of the suits seek class-action status.

News of the Zurich American dispute appeared in Friday’s Wall Street Journal.