Revealed: The full details of Co-op Insurance and “reckless” IBM’s feud

Co-op Insurance has hit out at IBM with a £130m law suit after the tech giant pulled out of its £55m contract to upgrade the insurer’s technology systems.

Court documents reveal the extent of the fall out between the two companies, depicting a deal that may have been doomed from the beginning, and raising questions over whether IBM would ever have been able to match up to its promises.

IBM won the tender to supply Co-op with its new platform in September 2014, and signed a contract promising to deliver a complete end-to-end solution by the end of December 2017, court documents show.

However, Co-op alleges that problems began when there were “chronic and serious delays”, which IBM blamed on its sub-contractor Innovation Group. The sub-contractor was due to supply £46m worth of software for the transformation.

One phase of the project even had its probable completion date shunted back a year and a half, the claim form shows. 

This led Co-op to question whether IBM actually had the capacity to fulfill its promises and finish the upgrade in the first place.

Damages served to IBM

In April 2016, Co-op served IBM with a dispute for damages totalling £110.6m.

In May, Co-op demanded an extra £15.4m for additional loss and damages, which it claims were ”continuing”, the court papers show. 

Following this, IBM allegedly threated to cancel the contract over an unpaid invoice worth £2.9m.

This plunged the pair into further dispute, with Co-op arguing that the invoice  in question “suffered from a number of defects and deficiencies”, was in breach of their contract, and was not even due.

Damage to Co-op from fallout 

When IBM refused to continue working on the project and pulled out ofp the contract, the insurer blasted IBM as committing “intentional breaches” and claims it was forced to accept the termination, as no more work would be carried out by IBM.

IBM was aware that Co-op would “suffer very substantial loss and damage”, it is alleged.

Further, the documents allege that the tech giant “did not care” whether Co-op took a hit, “but was concerned only with its own economic position.”

Co-op has now filed a suit against IBM for £130m, to cover vast costs including £55m paid to third party suppliers, £44m on finance costs, in addition to other expenses.

However, IBM has vowed to “rigorously defend” against the claim, which has been brought to the High Court in London.

When contacted, both Co-op and Innovation Group declined to comment.