**STARR EXCESS**

April 10, 2000

David Blake  
Manager of Risk & Insurance Management  
IBM  

Page 2  

conduct in question in the other reported suits range back over an extended period of years. As such, Endorsement No. 7 to the policy (copy enclosed) will be relevant to any coverage analysis. It provides that "Bodily Injury or Property Damage which occurs, or an offense causing Personal Injury or Advertising Injury committed, prior to May 21, 1998, but not before May 21, 1990 [for the layer $75 million excess $170 million or, May 21, 1986, for the layer $75 million excess $245 million] shall be deemed to have occurred or to have been committed during the Policy Period of this Policy, provided: (a) such...Injury: (i) is not covered under any policy in force prior to May 21, 1998, and (ii) would be covered by the Followed Policy...[and] (b) the Insured was not aware of the Occurrence or offense...prior to the inception date of the policy...." Moreover, even if the loss is deemed to have occurred in the Starr Excess International policy period, there would be an each occurrence retention of $170 million and $245 million for our layers, respectively.

Here, it appears several suits, or the occurrences or injuries underlying them, were either known or reported to prior carriers. Therefore, there would be issues of coverage to investigate at the appropriate time, and Starr Excess International must reserve its rights accordingly. In doing so, any further action taken by or on behalf of Starr Excess International should not be construed as a waiver of its rights.

Please keep us advised if any claim looks like it could exceed a per occurrence retention of $170 million. Otherwise, feel free to contact me should you have any questions or have any facts or authority you wish us to consider in connection with our coverage position.

Very truly yours,

David A. Balmuth  
Senior Vice President -- Legal/Claims  

MM 002788