IBM has said it is ’disappointed’ with the ruling and intends to seek appeal 

A Court of Appeal ruling on 4 April 2022 found that computer hardware firm IBM must pay another £80.6m ($105.7m) to the owner of Britain’s Co-operative Insurance due to an IT contract mishap.

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The case in question, IBM v Co-op, involved a large-scale IT contract between IBM and CIS General Insurance Ltd (CISGIL), which trades as the Co-Insurance (Co-op), for the development of a new insurance underwriting system. The Co-op allegedly sued IBM for £155m in 2020. 

A spokesperson for IBM said: “IBM is disappointed in the ruling from the Court of Appeal and intends to seek permission to appeal this decision to the Supreme Court of the United Kingdom.”

Long standing dispute

Back in June 2015, Co-op Insurance (CISGIL) hired IBM to update its key technology systems. 

Both parties entered into an IT contract worth around £50m as part of a digital transformation project.

To deliver part of the project, IBM sub-contracted some of its services. The deal included £46m in software from The Innovation Group. 

But delivery of this project was time-sensitive and IBM’s sub-contractor majorly underperformed. For example, there were delays in the project causing key milestone dates to be missed, issues with the coding and other factors.

This meant that IBM was in breach of its contract, however the Co-op decided not to terminate the contract with IBM despite it failing to remedy breaches when hit with a notice of breach, according to law firm Anthony Collins.

Meanwhile, when payment of an invoice worth approximately £2.8m was due, Co-op withheld the payment stating that it was offsetting the damages from IBM’s breach from all future invoices.

Following this, IBM terminated the contract, bringing a halt to the project to mitigate substantial losses.

However, the contract contained a limitation of liability clause and IBM took the risk of wrongfully terminating the contract and relying on this clause to limit its financial exposure as it would have been cheaper than finishing the project.

A Co-op spokesperson said:“We are pleased with the Court of Appeal decision, which significantly increases the amount awarded in this long-standing dispute. “

It follows a similar case in May 2020 between IBM and Direct Line’s subsidiary DL Insurance Services Ltd (DLIS).

Insurance Times has contacted Anthony Collins for comment.

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