Insurance company Prudential claims that it has lost millions of pounds in a project to build what would have been one of the UK's largest and most advanced Web-based IT systems.
In an attempt to recover the money Prudential is suing Unisys, one of the biggest IT suppliers in financial services, over what it claims are the supplier's "failures and inabilities to perform its obligations".
Prudential Europe Management Services, Prudential Services and Prudential Jersey are seeking more than £12m in damages from Unisys after the alleged failure of a project dubbed "Unite" which was crucial to Prudential's European expansion strategy. The claim could total more than £15m.
Unite was based on the Unisure software package supplied by Unisys, which has been described as the jewel in the crown of the supplier's European insurance business.
Unisure customers have included Norwich Union, Virgin Direct, and Royal & Sun Alliance.
A key aim of Unite was to give Prudential agents in Europe the ability to process orders for new policies and pensions via the Internet in near real-time.
The termination of the project left Prudential having to enact a contingency plan and rely on its ageing legacy applications.
This involved part-manual processing of thousands of life policies and pension plans while it built new systems using mainly in-house skills.
The main Unite contract with Unisys was signed in late 2000 and terminated in September 2001 before most of the main Unisure-based systems had been formally accepted by Prudential.
Since then, the two sides have been working to negotiate a settlement, Prudential having spent nearly £12m by the time it cancelled the contract. Unisys was understood to have spent about £10m on the project.
The launch of High Court action this week indicates that negotiations have broken down. The claim stated that Prudential Jersey terminated the software agreement on 7 September 2001 due to Unisys' "failures".
It added that damages in excess of £12m are being sought, including "expenditure wasted by reason of [Unisys'] breaches of contract relating to the Unite project".
It is the third time in 10 years that a Unisys customer has sued the supplier in the High Court over a problem with an insurance project (see below).
An executive at a third-party supplier involved in Prudential's Unite project claimed that both sides were victims of "management by assertion" - when they had agreed an extremely tight timetable for delivering the new system, without sufficiently questioning how achievable it was.
Richard Bowdidge, associate director of specialist IT insurance adviser Miller Insurance, said he was surprised that the dispute had led to court action which would raise questions about Unisys' ability to perform.
No date has been set for a hearing. Prudential and Unisys declined to comment.
Earlier actions against Unisys
This is the third time Unisys has faced High Court action for early ending of an insurance project. The others were:
In 1994 a High Court judge found against Sperry, later Unisys for misleading sales claims
In 2001 a High Court hearing brought by United Assurance (Royal London Insurance) accused it of misrepresentation. The case was settled out of court.
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