Judge Quashes Zurich's Liability Lawsuit Against Microsoft

A federal judge has thrown out Zurich American Insurance Co.'s lawsuit against Microsoft Corp. Zurich sought protection from paying the software giant's legal bills arising from 137 private antitrust lawsuits.

Zurich sued Microsoft in April 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. The case remains active, leaving the liability question in a judge's hands.

On June 2, 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 states in the decision.

Zurich contends Microsoft's liability insurance does not cover antitrust issues. Fidelity and Guaranty Insurance Co., which provides Microsoft with liability insurance, also is refusing to cover the company's legal costs.

Both insurers, as well as 11 others with Microsoft liability insurance policies, now will have to defend their position in federal court in Seattle. In its own lawsuit, Microsoft says the insurers are obligated to pay the legal bills for the private antitrust lawsuits.

Microsoft spokesperson Jim Cullinan says his company is pleased with the judge's decision. "We look forward to pursuing these claims out here in Seattle, which we believe is the appropriate venue," he says.

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 Cullinan denies. Microsoft could lose millions of dollars even if only a few suits are successful, because the private suits are seeking triple damages. Microsoft is not seeking insurance coverage for its antitrust battle with the U.S. Justice Department.

Zurich spokesperson Pat Schnably declines to comment because the litigation is still pending.