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Eugene R. Anderson, one of the deans of the plaintiffs’ insurance bar, at first used a profanity to describe how he thinks insurance companies are handling certain Sept. 11 claims. He backed off a bit, but he still says he is angry and frustrated at how insurance carriers are delaying and “papering” clients to death as they pursue claims for business interruption. Immediately after the Sept. 11 attacks, insurance companies appeared to don the patriotic mantle by immediately announcing they would not invoke the act-of-war exclusion in insurance contracts to block claims. But since then, some attorneys representing policyholders, like Anderson of New York’s Anderson Kill Olick & Oshinsky, say patriotism is a distant memory as insurers begin battling businesses over claims that range from several hundred thousand dollars to as much as a billion dollars. It is too early to say how much litigation there will be over the issue, but there are signs that court battles lie ahead. So far, according to the American Insurance Association, 21,597 insurance claims seeking $14.5 billion have been filed in New York state since the terrorist attacks. The association says 4,128 claims are for business interruption, with the loss pegged at $2.6 billion in those claims. With the insurance industry expecting claims of between $40 billion and $50 billion nationwide, many more involving business interruption are expected in New York and across the country. In addition to claims from tenants in and around the World Trade Center, others can range from a mom-and-pop dry cleaner and a four-star restaurant near ground zero, to airports, hotels and other businesses affected by air travel around the country. ‘SERIOUS CONCERNS’ Mark Miller, a shareholder in Greenberg Traurig’s Washington, D.C., office, says that his firm represents about 10 clients with significant business interruption claims, including some airlines, which he would not identify. “We have serious concerns about resolving these claims without litigation,” says Miller. Of insurers, he says, “My interpretation is they totally ignore the claims, delaying and ultimately not paying these claims outside ground zero, despite language in the policies to the contrary.” A point of contention between insurers and businesses filing claims is whether the business must have suffered physical damage to be eligible for a business interruption claim. Although each claim is governed by the wording of a businesses insurance policy, Miller and others say, boilerplate language applies to many. One clause that deals with egress and ingress, he says, means that if losses occur because employees and customers are unable to get in and out of a business due to an act beyond their control, the insured is entitled to be compensated for losses related to the interruption of its business. He says insurers, whom he would not name, are not yet honoring this clause. Lawyers representing other policyholders point to different boilerplate language. Matthew Jacobs, who oversees the insurance practice for Kirkpatrick & Lockhart in its D.C. office, says he is battling with an insurance company over the meaning of the “civil authority provision” in an insurance contract for his client, a large hotel in Washington. He says the hotel’s claim, approximately $1 million for lost business, is the result of the federal government’s closing of the Ronald Reagan Washington National Airport following the attacks on the Pentagon and the World Trade Center, and the subsequent tightened security at government buildings near the hotel, which restricted access to the hotel. The hotel suffered no physical damage on Sept. 11, and Jacobs says that the civil authority provision allows for business interruption claims “as long as there is some physical loss or damage in the chain of causation … and that the order of civil authority by the local police and other military agencies resulting from the 9/11 attacks arose directly from the loss to the Pentagon and the WTC,” he wrote in an e-mail response. The civil authority provision reads, in part: “Coverage is provided when access to the described location is prohibited by order of civil authority. This order must be given as a direct result of physical loss or damage from the peril of the type insured by this policy.” According to Jacobs, the insurance company interprets this to mean “that the reference to ‘physical loss or damage from a peril’ refers to physical loss to the insured’s property, as opposed to physical loss or damage” to a neighbor or at the Pentagon. He says negotiations to resolve the matter are ongoing, but that it may result in litigation. P.J. Crowley, a vice president of the Insurance Information Institute, an information arm of the property and casualty insurance industry, says it is too soon and the issues are too complex for anyone to judge the insurance industry about Sept. 11-related business interruption claims. “This is the most complex disaster in history and understandably, businesses and insurers will need time to sort through the aftermath of 9/11,” he says. He adds that the current recession makes the claims that much more complex because the parties must determine how much of the lost income was caused by hard economic times and how much by the terrorist attacks. Barry R. Ostrager, whose firm, New York’s Simpson Thacher & Bartlett, represents many of the largest insurance companies, says the industry is carefully examining claims and will pay those it believes are justified under their policies. “The reality is, insurance companies need to pay claims and want to pay meritorious claims in order to validate their purpose,” Ostrager says. But, he adds, with regard to business interruption claims, “There’s got to be a fairly direct and proximate link between the business interruption and the event of 9/11. Some of this is so speculative and related to the economy that it’s not reasonable for an insurer to pay the diminution in revenue.” TWO SUITS So far, at least two lawsuits have been filed that deal directly with business interruption claims from Sept. 11. On Dec. 3, two New Orleans hotels, the Saint Louis and the Saint Ann/Marie Antoinette Hotel, filed suit in Louisiana Civil District Court in New Orleans against the Assurance Co. of America, seeking $203,000 in lost business. 730 Bienville Partner Ltd. v. Assurance Co. of America, No. 2001-19830. At issue is the civil authority provision, says the hotels’ attorney, David Bowling of New Orleans’ Wilson & Bowling, explaining that the hotels lost business because the federal government shut the nation’s airports. He said the insurer, in part, denied coverage because the hotels themselves did not suffer any physical damage. “We specifically purchased a policy that provides for reimbursement for something that happens off the premises,” Bowling says. Calls to Thomas Gaudry Jr. of Gretna, La.’s Windhorst, Gaudry, Ranson, Higgins & Gremillion, who represents the defendant, were not returned. In the second suit, filed Dec. 12 in the federal court for the Southern District of New York, Zurich American Insurance Co. is seeking a declaratory judgment against policyholder ABM Industries. ABM, a business services company, provided services at 1, 2, 4, 5 and 7 World Trade Center and other buildings in lower Manhattan. According to the complaint, the issue is whether ABM’s policy limits its business interruption claim to no more than $10 million. Zurich American Insurance Co. v. ABM Industries Inc., No. 01-1246. “It is Zurich’s position that the $10,000,000 per occurrence limit of liability applies to the loss of earnings component of ABM’s claim because it arises from damages and destruction of premises of ABM’s customers,” states the complaint, filed by New York’s Mound, Cotton, Wollan & Greengrass. The suit asserts that ABM filed an insurance claim in excess of $10 million for lost business. ABM’s attorney, John Ellison, at Anderson Kill, said he could not comment on the case. HOW MUCH LITIGATION? It’s clear that the ABM and New Orleans hotel cases will be followed by other litigation concerning the issue of business interruption coverage. How much litigation, though, is the question. “It’s kind of an open book now,” says Andrew Reidy of D.C.’s McKenna & Cuneo, who represents a half dozen clients who have filed business interruption claims with insurers after Sept. 11 that range in value from a few million to tens of millions of dollars. “I think in February and March we’ll see disputes ripen if they are going to be disputes,” he says. Throughout this process, as always, the insurance industry will be on the lookout for businesses trying to take advantage by filing fraudulent claims. On Nov. 4, the New York State Insurance Department announced the establishment of a plan preemptively to fight fraud relating to Sept. 11 claims. “I have heard some comments of people trying to take advantage,” says Laura Foggan, of D.C.’s Wiley, Rein & Fielding, who represents large insurance carriers, adding cautiously, but “I am not in a position to personally document that.”

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