SAP sues insurer over Waste Management lawsuit settlement

SAP is suing insurer Swiss Re International, claiming that the company has refused to pay its share of an US$80 million settlement with Waste Management, which had brought suit against SAP in 2008 over a troubled software project.

Waste Management's suit lodged an array of colorful allegations against SAP, including a charge that company executives used a "fake" software demonstration to trick the trash hauler into believing SAP's products would meet its needs.

Waste Management had been seeking more than $1 billion in damages from SAP, but the parties entered mediation in March 2010 and soon reached an agreement for the $80 million, according to SAP's complaint against Swiss Re, which was filed last month in a Delaware court. The action was removed last week by Swiss Re to U.S. District Court for the Eastern District of Pennsylvania.

SAP had told Swiss Re, one of its liability insurance providers, that the settlement was imminent, and a policy SAP acquired from Swiss Re in 2007 granted the company ¬15 million ($18.5 million) in coverage, its complaint adds.

Swiss Re didn't object to the settlement but also wouldn't commit to paying its share of the $80 million, according to SAP.

At one point in February 2011, Swiss Re's law firm told SAP that there were "several arguments" it could make "to avoid providing insurance coverage to SAP" under the policy's terms, the complaint states.

While SAP and Swiss Re recently spent a number of months discussing a mediation process, "those negotiations have broken down," SAP added.

In contrast, a number of other insurers, including AIG Europe, have made payments in full according to the policies SAP held with them, the complaint adds.

SAP is demanding "all amounts due" from Swiss Re as well as assorted damages and other costs.

Swiss Re's notice of removal doesn't directly address SAP's allegations. The company didn't immediately respond to a request for comment on Monday.

SAP's lawsuit is sure to spark some tensions between the two companies, which have a history outside the disputed insurance policy. In 2007, they announced that Swiss RE would use SAP software to "to harmonize and consolidate its global human resources, finance and logistics processes."

Chris Kanaracus covers enterprise software and general technology breaking news for The IDG News Service. Chris' email address is Chris_Kanaracus@idg.com