Three months after Hurricane Sandy destroyed the infrastructure of many offices in lower Manhattan, displaced law firms and legal agencies are trickling back downtown. High on the agenda for some firms will be attempting to recover business contingency and relocation expenses.
Fragomen, Del Rey, Bernsen & Loewy, however, is still unsure when it can move back to 7 Hanover Square. The firm is waiting for the building’s main tenant, Guardian Life Insurance Co. of America, to return, said Michael Patrick, Fragomen partner and executive committee member.
“Guardian continues to believe that the building is not sufficiently functional and thus usable and we are continuing to follow their lead,” said Patrick, who cited electrical issues as a concern.
Others, however, have moved back into 7 Hanover Square. New York Legal Assistance Group, which occupies the 18th floor, returned on Jan. 9.
“Power has been restored through a generator for our floor and a few others,” said Merritt Birnbaum, director of development.
“We have Verizon phone service, we have our Internet providers. We have electricity,” said NYLAG president Yisroel Schulman. “Except for the fact that the building is a little empty, it’s basically the same” as before the storm.
The nonprofit legal services provider had staff temporarily based at 11 law firms and the UJA-Federation of New York, all of whom donated office space.
NYLAG had to rebuild its entire server to run its operations, Birnbaum said, and incurred about $75,000 in IT and moving equipment expenses. That amount is not covered by insurance, but the group has received contributions and support to help cover the cost, she said.
“We’re still looking for more contributions,” she added.
Lawyers and staff of the Legal Aid Society returned on Jan. 15 to their headquarters at 199 Water St., but the agency said last week its land-line phones were not working. The group is relying on cell phone service and land-lines in other locations, including a switchboard in the Bronx office, said attorney-in-chief Steven Banks.
He said Legal Aid was able to bypass the Verizon circuit by connecting its computer services directly to its data center, restoring email, Internet access and computer files.
“We’re certainly pleased to be back in our office and [regrouping] our central staff, but we’re concerned about the continuing lack of telephone services,” Banks said.
Legal Aid said Verizon notified the group that it would attempt to restore phone service over the Martin Luther King Jr. Day weekend.
After the storm, the group’s 400 lawyers and staff who are based at Water Street moved into Legal Aid’s other locations and offices at Paul, Weiss, Rifkind, Wharton & Garrison and Skadden, Arps, Slate, Meagher & Flom.
Harris Beach returned to its 100 Wall St. office on Jan. 7, said COO William Kedley. The office switched to an Internet-based phone system as part of its return, he said.
Harris Beach returned just before its temporary arrangement at 1290 Avenue of the Americas expired, Kedley said.
Cahill Gordon & Reindel moved back to 80 Pine St. on Jan. 7 with fully functional services, said spokeswoman Lynn Tellefsen, who called the transition smooth. The firm’s New York lawyers, numbering about 300, were working from 1271 Avenue of the Americas after Sandy hit.
As for Fragomen’s office at 7 Hanover Square, Patrick said on Jan. 18 that electricity continues to be a problem.There was a recent power outage, which would have presented a “serious problem” if the firm was there, and the building’s owner was prohibiting anyone from entering over the weekend, Patrick said.
“I think Guardian’s point of view is that the systems are not 100 percent,” Patrick said. “You can’t run a business if you’re not confident you’re going to have consistency and dependability on the systems you run.”
Fragomen occupies the 10th, 11th, and 12th floors and part of the 8th floor at 7 Hanover Square.
The firm’s 350 employees in New York, including 80 lawyers, have taken temporary space at 1301 Avenue of the Americas, occupying some of Dewey & LeBoeuf’s former office. The arrangement runs through April 30 but Patrick is hoping Fragomen can leave earlier.
“That’s way too long,” he said.
A critical period for Fragomen are the weeks before early April in which the firm prepares and files applications for H-1B professional visas.
“We file thousands of applications,” Patrick said. “It is going to be very, very difficult for us to manage a move during that period.”
The nearly 20 attorneys at Gordon & Rees’ New York office hope to return to 90 Broad St. by Feb. 1, after dealing with air quality and mold spore concerns, said Mercedes Colwin, managing partner of the New York office.
She said the building’s lower floors were saturated with surge waters from Sandy.
“We were immediately concerned about mold spores,” she said.
Environmental experts have been hired and the firm is waiting on air quality reports, she said. The firm’s lawyers have been working at 1040 Avenue of the Americas.
Colwin noted that all the firm’s files are digital and the relocation has not affected the ability to handle client matters.
In addition to resuming business in their own offices, some firms are in the midst of handling insurance claims.
Kedley, of Harris Beach, said the firm is submitting claims for business interruption and extra expenses incurred during relocation. He estimated insurance claims will be about $500,000 or more.
Fragomen’s claims for business interruption insurance will be more than $500,000 but the firm doesn’t have a final tally, Patrick said.
“We are far from clarity on that, too, regarding our insurance carrier and its willingness to consider” the claim, he added. “We’ve told them we believe it’s covered by the policy.”
Banks said Legal Aid is filing claims with the Federal Emergency Management Agency and its insurers for the expenses it incurred during the relocation and the impact of the disruption on its operations. The exact amount of the damage is under review, Banks said.
“As we’ve seen in client cases we’ve been handling, the process of getting FEMA and insurance coverage has been anything but linear,” he said.
In early January, Shapiro Beilly Aronowitz at 225 Broadway filed suit against National Fire Insurance Company of Hartford claiming the firm suffered loss of business income and extra expenses totaling about $73,000, but that no part of its coverage has been paid.
Shapiro Beilly said in its complaint that the policy has a flood exclusion, but cites policy language that states “if water…results in fire, explosion or sprinkler leakage, we will pay for the loss of damage” and other language that says coverage is provided when “loss caused by or resulting from ‘breakdown’ to equipment that is owned, operated or controlled by a local public or private utility.”
The law firm’s attorney, David Karel of Wilkofsky Friedman Karel & Cummins, said the office didn’t experience any physical damage and the lawyers have returned. But the insurer says “the policy doesn’t provide coverage,” he said. “They don’t know how to read the policy.”
National Fire is an underwriting company under CNA. The company in a statement said that “National Fire Insurance Company of Hartford is proud of it award winning claims service and at all times acted professionally and in good faith in the handling of Shapiro, Beilly & Aronowitz’s claim. The company denies the allegations in the complaint and will vigorously defend the lawsuit.”
Karel said he expects his own law firm to file many other suits like these in the coming weeks.
“There are so many instances of insurance companies just flat out denying claims” after Sandy, he said. “The lawsuits are just starting.”
@|Christine Simmons can be contacted at email@example.com.