REPORT TITLE:
Year 2000 immunity


DESCRIPTION:
Creates a dispute resolution process for Year 2000 error disputes
and limits liability for the private sector regarding Year 2000
errors.  (SD1)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        1111
HOUSE OF REPRESENTATIVES                H.B. NO.           H.D. 2
TWENTIETH LEGISLATURE, 1999                                S.D. 1
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO YEAR 2000 ERRORS BY COMPUTER-BASED SYSTEMS.



BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 1      SECTION 1.  The legislature finds that virtually every
 
 2 business and consumer in the State of Hawaii is potentially
 
 3 affected by the practice in many computer-based systems of
 
 4 utilizing the two low order digits to represent a four digit
 
 5 year.  While this is common practice for handwriting dates, such
 
 6 as 1/1/98 as an abbreviation of January 1, 1998, it will lead to
 
 7 errors in computer-based systems that handle date data in and
 
 8 after the year 2000.  This practice, along with the use of other
 
 9 erroneous date-related computer logic, came to be known as the
 
10 "Year 2000 problem."
 
11      The legislature further finds that in the absence of
 
12 remedial legislation, the usual methods of determining
 
13 responsibility and providing remedies for year 2000-related
 
14 errors through the courts are likely to result in a multitude of
 
15 lawsuits and the expenditure of substantial time and money in the
 
16 litigation process.  Additionally, the legislature finds that
 
17 businesses are diverting money and other resources away from
 
18 programs to remedy the year 2000 problem at this critical time to
 
19 work on litigation defense and claims preservation strategies.
 

 
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 1 This diversion of resources has the potential to impair
 
 2 completion of these essential year 2000 compliance programs.
 
 3      The pervasive nature and fixed deadline of the year 2000
 
 4 problem creates a unique situation which justifies a modification
 
 5 to the usual legal rights, remedies, and dispute resolution
 
 6 procedures available under the law.
 
 7      This Act is intended to provide protection for persons who
 
 8 exercise commercially reasonable efforts to identify and find
 
 9 solutions for computer-based systems that may be affected by year
 
10 2000 errors.
 
11      SECTION 2.  The Hawaii Revised Statutes is amended by adding
 
12 a new chapter to be appropriately designated and to read as
 
13 follows:
 
14                             "CHAPTER
 
15            YEAR 2000 ERRORS IN COMPUTER-BASED SYSTEMS
 
16      §    -1  Definitions.  Whenever used in this chapter, unless
 
17 the context otherwise requires:
 
18      "Claimant" means the plaintiff in a lawsuit or a person
 
19 otherwise asserting a claim.
 
20      "Computer-based system" includes any computer or other
 
21 information technology system, and any electronic device that
 
22 controls, operates, monitors, or assists in the operation or
 
23 functioning of equipment, machinery, plant, or a device using an
 

 
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                                     H.B. NO.           H.D. 2
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 1 embedded or installed microprocessor or chip.
 
 2      "Consumer" means a natural person who, primarily for
 
 3 personal, family, or household purposes, purchases, attempts to
 
 4 purchase, or is solicited to purchase goods or services.
 
 5      "Core activities" means those business activities of a
 
 6 person that are supported by computer-based systems and which
 
 7 have been identified by the person, based on reasonable internal
 
 8 criteria, as being central to the continued operation of the
 
 9 business.
 
10      "Government employee" means an officer or employee of the
 
11 State, any county, or board, including a person acting on behalf
 
12 of a board in an official capacity, temporarily or permanently,
 
13 whether with or without compensation.
 
14      "Joint tortfeasors" means joint tortfeasors as defined in
 
15 section 663-11.
 
16      "Noneconomic damages" means damages including physical and
 
17 emotional pain, suffering, physical impairment, emotional
 
18 distress, mental anguish, disfigurement, loss of enjoyment, loss
 
19 of companionship, services, and consortium, and other
 
20 nonpecuniary losses.
 
21      "Remediation steps" for a person addressing potential year
 
22 2000 errors generally consist of awareness, assessment,
 
23 renovation, validation, and implementation.  The reasonableness
 

 
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                                     H.B. NO.           H.D. 2
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 1 of those steps is determined by the circumstances, including the
 
 2 sophistication of and resources available to the person carrying
 
 3 them out.  Where applicable, the person's highest level of
 
 4 management should determine what efforts are to be made and what
 
 5 resources are to be used in carrying out the remediation steps,
 
 6 and the person should monitor progress in taking the remediation
 
 7 steps.
 
 8      (1)  The awareness step generally includes providing any
 
 9           supervisory personnel with information about the year
 
10           2000 problem and the designation of personnel to deal
 
11           with the person's potential for year 2000 errors;
 
12      (2)  The assessment step generally includes:
 
13           (A)  A determination of the impact of potential year
 
14                2000 errors on the person, including those caused
 
15                by computer-based systems controlled by the person
 
16                and those controlled by others;
 
17           (B)  Identification of core activities;
 
18           (C)  A physical inventory of potentially affected
 
19                computer-based systems supporting core activities;
 
20           (D)  Prioritization of items with potential year 2000
 
21                errors to create a remediation schedule;
 
22           (E)  Determining whether the item records dates or
 
23                processes date information;
 

 
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                                     H.B. NO.           H.D. 2
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 1           (F)  Identifying and obtaining resources to address
 
 2                potential year 2000 errors;
 
 3           (G)  The development of a remediation strategy for each
 
 4                item with the potential for year 2000 errors; and
 
 5           (H)  The development of a recovery plan to handle those
 
 6                year 2000 errors which are reasonably likely to
 
 7                occur;
 
 8      (3)  The renovation step generally includes the conversion,
 
 9           upgrade, replacement, or elimination of computer-based
 
10           systems supporting core activities which are subject to
 
11           year 2000 errors;
 
12      (4)  The validation step generally includes validating
 
13           existing, converted, or replaced computer-based systems
 
14           supporting core activities; and
 
15      (5)  The implementation step generally includes the placing
 
16           of renovated or replaced computer-based systems into
 
17           production use.  Where a computer-based system cannot
 
18           reasonably be renovated, the implementation step
 
19           generally includes the implementation of a work-around
 
20           designed to avoid the effect of the potential year 2000
 
21           error.  Additionally, this step includes the
 
22           implementation of contingency or recovery plans for
 
23           those year 2000 errors which are reasonably likely to
 

 
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                                     H.B. NO.           H.D. 2
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 1           occur.
 
 2      "Respondent" means the defendant in a lawsuit or a person
 
 3 otherwise defending against a claim, and includes those persons
 
 4 who are liable on a claim, but who were not made a party to the
 
 5 lawsuit or other assertion of the claim.
 
 6      "Validating" means:
 
 7      (1)  Testing the item to:
 
 8           (A)  Actually simulate the transition from December 31,
 
 9                1999, to January 1, 2000;
 
10           (B)  Process other date data which may reasonably be
 
11                expected to trigger a year 2000 error; and
 
12           (C)  Determine that no year 2000 error occurs;
 
13           and
 
14      (2)  Where an item has been renovated to correct known or
 
15           suspected year 2000 errors, testing to assure that the
 
16           item properly performs its functions without error.
 
17           This testing includes integration and acceptance
 
18           testing.  When testing is not reasonably possible, the
 
19           validation step consists of securing documentation from
 
20           the developer or vendor of a computer-based system
 
21           supporting core activities that it is free of potential
 
22           year 2000 errors.  This includes vendors of core
 
23           business functions, services, or supplies who
 

 
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 1           understand the risk posed by the person's supply chain.
 
 2      "Year 2000 error" means a failure of a computer-based system
 
 3 to accurately store, display, transmit, receive, process,
 
 4 calculate, compare, or sequence date and time data from, into, or
 
 5 between the years 1999 and 2000 and beyond, and leap year
 
 6 calculations.
 
 7      §    -2  Applicability.(a)  Claims properly filed by
 
 8 consumers in the small claims division of the district courts
 
 9 shall be excluded from the alternative dispute resolution process
 
10 and the limitations on liability provisions contained in
 
11 sections  -5 and   -6.
 
12      (b)  Claims alleging physical injury as the direct and
 
13 proximate result of a year 2000 error shall be excluded from the
 
14 alternative dispute resolution process provisions contained in
 
15 section  -5.
 
16      (c)  This chapter shall not apply to claims asserted by or
 
17 against the State, any county, a board, or a government employee,
 
18 arising out of or relating to a year 2000 error produced,
 
19 calculated, or generated by a government computer system or other
 
20 government computer-based system, regardless of the cause for the
 
21 year 2000 error; provided that nothing in this subsection shall
 
22 be deemed to apply to any claim asserted against a government
 
23 employee to enforce a mortgage obligation or other similar
 

 
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                                     H.B. NO.           H.D. 2
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 1 personal obligation of the government employee which is unrelated
 
 2 to the government employee's employment.
 
 3      As used in this subsection "board" means any agency, board,
 
 4 commission, authority, or committee of the State or any county
 
 5 that is created by the state constitution, statute, ordinance,
 
 6 rule, or executive order to have supervision, control,
 
 7 jurisdiction, or advisory power over specific matters.
 
 8      (d)  Sections    -5 and    -6 may be modified or waived by
 
 9 express agreement of the parties.  Any such modification or
 
10 waiver shall be explicit, and no intent to modify or waive these
 
11 protections shall be inferred.
 
12      §    -3  Blanket protections.(a)  No punitive or exemplary
 
13 damages, and no statutory minimum or treble damages shall be
 
14 awarded under any theory of recovery, including contract and tort
 
15 law, for claims arising out of a year 2000 error unless one of
 
16 the following is found to have occurred in addition to the other
 
17 facts necessary for the award of such damages:
 
18      (1)  The year 2000 error was intentionally created by the
 
19           respondent with the intent to cause damage or injury;
 
20      (2)  The respondent had entered into an agreement to
 
21           discover or remedy year 2000 errors with the intent to
 
22           defraud the claimant; or
 
23      (3)  The damage or injury was caused by the dissemination of
 

 
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                                     H.B. NO.           H.D. 2
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 1           corrupted data to recipients:
 
 2           (A)  With actual knowledge that errors were occurring;
 
 3           (B)  Without reasonable efforts at warning; and
 
 4           (C)  Without reasonable efforts to correct the cause of
 
 5                the errors.
 
 6      (b)  Noneconomic damages (including, but not limited to,
 
 7 physical and emotional pain, suffering, physical impairment,
 
 8 emotional distress, mental anguish, disfigurement, loss of
 
 9 enjoyment, loss of companionship, services, and consortium, and
 
10 other nonpecuniary losses) shall not be awarded under any theory
 
11 of recovery for any claim arising out of a year 2000 error except
 
12 for physical injury directly and proximately caused by a year
 
13 2000 error.
 
14      (c)  Joint tortfeasors shall not be held jointly and
 
15 severally liable under any theory of recovery for any claim
 
16 arising out of a year 2000 error.
 
17      §    -4  Limitation of actions.  Any other provision of law
 
18 notwithstanding, all claims arising out of a year 2000 error
 
19 shall be brought no later than two years after the claimant
 
20 discovers, or through the use of reasonable diligence should have
 
21 discovered, the damage or injury, but in any event not more than
 
22 four years after the date of the alleged year 2000 error.
 
23      §    -5  Procedure; alternative dispute resolution.  In any
 

 
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                                     H.B. NO.           H.D. 2
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 1 dispute in which a year 2000 error is alleged as a claim or a
 
 2 defense, within twenty days of service of the last pleading, the
 
 3 plaintiff shall contact the court in which the action has been
 
 4 filed and shall schedule a conference.  The court and the
 
 5 attendees shall discuss alternative dispute resolution options.
 
 6 The court may require each party to submit to the court prior to
 
 7 the conference a statement of any objections to alternative
 
 8 dispute resolution and the reasons for objecting.  The court, in
 
 9 its discretion or upon motion by a party, during the conference
 
10 or at a later date, may order the parties to participate in an
 
11 alternative dispute resolution process subject to conditions
 
12 imposed by the court.
 
13      §    -6  Limitation of liability.(a)  All arbitration
 
14 awards and all judgments in a court proceeding that award damages
 
15 on a claim arising out of a year 2000 error shall state whether
 
16 the claimant and the respondent engaged in commercially
 
17 reasonable efforts to avoid the impact of year 2000 errors.
 
18      (b)  The trier of fact shall make an independent
 
19 determination that the actions taken by a claimant or respondent
 
20 constitute commercially reasonable efforts, based on the totality
 
21 of the circumstances, and notwithstanding that the respondent's
 
22 efforts failed to avoid all year 2000 errors affecting its
 
23 computer-based systems.  In making the determination, the trier
 

 
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                                     H.B. NO.           H.D. 2
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 1 of fact shall examine the party's efforts as a whole, and shall
 
 2 take into consideration the sophistication of and resources
 
 3 available to the party.  The burden of proof shall be on the
 
 4 party, claiming to have engaged in commercially reasonable
 
 5 efforts, and the standard of proof shall be a preponderance of
 
 6 the evidence.
 
 7      (c)  A claimant or respondent shall be presumed to have
 
 8 undertaken commercially reasonable efforts if the claimant or
 
 9 respondent has, at a minimum:
 
10      (1)  Implemented the remediation steps; and
 
11      (2)  Complied with any data formats established by a
 
12           government regulation, a governing body, such as the
 
13           National Automated Clearing House Association for
 
14           certain financial transactions, or reasonably made a
 
15           request to the other party, resulting in the exchange
 
16           of electronic information which was impacted by the
 
17           alleged year 2000 error.
 
18      (d)  Except for claims where physical injury was directly
 
19 and proximately caused by a year 2000 error, upon a finding that
 
20 either:
 
21      (1)  A claimant did not engage in commercially reasonable
 
22           efforts; or
 
23      (2)  The respondent engaged in commercially reasonable
 

 
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                                     H.B. NO.           H.D. 2
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 1           efforts;
 
 2 the respondent's liability shall be limited to recovery of the
 
 3 claimant's actual out-of-pocket damages directly caused by the
 
 4 year 2000 error, and no consequential damages, such as loss of
 
 5 business opportunities or loss of profits, or other special
 
 6 damages shall be awarded under any theory of recovery.
 
 7      (e)  The amount awarded to any claimant shall be reduced to
 
 8 the extent that the claimant's failure to engage in commercially
 
 9 reasonable efforts contributed in whole or part to the damages
 
10 sustained.  Where two or more respondents are found liable for
 
11 the claimant's damages, the proportion of liability assessed
 
12 against each respondent shall be proportionately adjusted based
 
13 on the extent to which it engaged in commercially reasonable
 
14 efforts."
 
15      SECTION 3.  Nothing in this Act is intended to affect the
 
16 indemnity and defense coverage rights and obligations under any
 
17 contract of insurance.
 
18      SECTION 4.  If any provision of this Act, or the application
 
19 thereof to any person or circumstance is held invalid, the
 
20 invalidity does not affect other provisions or applications of
 
21 the Act which can be given effect without the invalid provision
 
22 or application, and to this end the provisions of this Act are
 
23 severable.
 

 
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 1      SECTION 5.  If any portion of this Act is found to be
 
 2 preempted by federal law or regulation, the remainder shall
 
 3 remain in full force and effect to the fullest extent consistent
 
 4 with the preemption.
 
 5      SECTION 6.  This Act shall not be deemed to impose any
 
 6 increased obligation, duty, or standard of care than is otherwise
 
 7 applicable under federal or state law.  It is not intended to
 
 8 create any new cause of action or remedy.
 
 9      SECTION 7.  The intention of this Act is to protect the
 
10 people of the State of Hawaii against harm that is pervasive and
 
11 that was generally unknown to businesses and consumers.  For that
 
12 reason, its provisions are remedial, and shall be construed to
 
13 provide the greatest level of protection.
 
14      SECTION 8.  This Act does not affect rights and duties that
 
15 matured, penalties that were incurred, and proceedings that were
 
16 begun, before its effective date.
 
17      SECTION 9.  This Act shall not affect any claim which has
 
18 been filed in the courts on the date of its enactment.  
 
19      SECTION 10.  This Act shall take effect on December 1, 2003;
 
20 provided that section 2 of this Act shall be repealed on
 
21 December 31, 2003.