Deutsche Bank Sues Allianz AG And AXA Over Sept. 11Claim

Last week, Deutsche Bank AG, one of the largest banks in theworld, filed a lawsuit against Allianz AG and AXA over a coveragedispute involving its heavily damaged office tower near the WorldTrade Center site.

In its complaint filed at the New York State Supreme Court inManhattan, Deutsche Bank argued that its tower, which stood at 130Liberty Streeta few hundred feet from the WTC complexhas not beenused since the Sept. 11 terror attacks and is beyond repair at thispoint. The company argued that these two insurers, which providehalf of the aggregate coverage, should pay for their part of thecost in demolishing and replacing the building.

“Now, the building has a 15-story gash on its front face, whichknocked out one of the columns supporting the building anddeflected another, caused by the toppling of the South Tower of theWorld Trade Center,” Deutsche Bank explained. The issue in thiscase, the bank added, is how long New Yorkers will have to sufferfrom this “unfortunate remnant of a national tragedy.”

“The black net enshrouded 41-story shell of 130 Liberty Street,”Deutsche Bank added, “is a stark reminder of the death anddestruction which took place on 9/11.”

But what really sets this lawsuit apart, according to oneinsurance lawyer, is that it's one of the first of its kind inproperty damage lawsuits to include environmental effects of9/11-related contaminants.

“This is a novel approach in that the lawsuit [adds] asbestos,mold and other contamination to the property damage,” said PeterGillon, an attorney and co-chair of national environmental practiceat Greenberg Traurig LLP, headquartered in Miami.

“This is the first coverage case that I am aware of that assertsenvironmental and health effects of exposures from dust and debrisfrom the World Trade Center collapse,” Mr. Gillon told NationalUnderwriter.

In its complaint, Deutsche Bank also discusses at great lengththe environmental effects of dust from the collapsed WTCtowers.

“The implosion of the South Tower generated tornado-force winds,which distributed fine dust from the destruction of the World TradeCenter into every nook and cranny of 130 Liberty Street through the15-story gash and approximately 1,700 broken windows,” DeutscheBank said.

The plaintiff noted that the collapse of the WTC North Towerspewed more dust, and during months of cleanup work at Ground Zero,strong winds sent more dust and smoke from the WTC debris into theDeutsche Bank tower through the gash and broken windows.

The main reasoning behind Deutsche Bank's argument that itsbuilding is “beyond repair” is that such dust contains hazardousmaterialsincluding asbestos, lead, mercury, other heavy metals,PCBs and furans (toxic chemicals formed during combustion). Thebank noted that these contaminants are widely spread inside thebuilding at levels “up to thousands of times greater” than theaverage accepted rate at other New York office buildings.

Additionally, the WTC towers' collapse crushed emergency dieselgenerators and a fuel tank in the building's basement and ignited afire. “This fire and the water which was poured onto it,” DeutscheBank explained, “gave rise to additional contamination in thebuilding, including dioxins.” Furthermore, the water from fightingthe firecombined with broken pipes, the loss of HVAC systems andthe building's exposure to the elementscreated extensive moldcontamination, the bank argued.

Deutsche Bank also told the court that while it is prepared tostart demolition of the building and incorporate the site into theoverall Ground Zero redevelopment plan, it is not in a position totear down the structure until the coverage issue is fullyresolved.

Deutsche Bank pointed out that its insurance policies for thebuilding should provide $1.715 billion of coverage, which is lessthan the $1.9 billion the company expects to lose, including costsof demolishing and rebuilding the site.

Further, Deutsche Bank noted that Zurich Financial Services andThe Chubb Corporation, two insurers that provide the other half ofthe aggregate coverage for the building, have already settled. “Twoof the four insurers on plaintiffs' policies, representing anaggregate of 50 percent of the coverage, have accepted plaintiff'soffer,” Deutsche Bank said.

The bank told the court that the remaining two insurers in thelawsuit must pay their share of the cost for razing and replacingthe building30 percent for Allianz and 20 percent for AXA, whichwould add up to some $858 million overall for two carriers.

“It sounds like there is a growing concern about environmentaleffects of exposure to dust and debris from the World Trade Centersite,” said Mr. Gillon. “Because of this growing environmentalconcern, we are probably going to see more cases like this oneagainst insurance companies in the future.”

A new study recently released by Mount Sinai School of Medicinein New York may also offer a glimpse into potential health effectsof WTC contaminants. Published earlier this month, the study foundthat pregnant women who were in the WTC area on 9/11 or up to threeweeks later were twice as likely as other women to bear smallerbabies.

Allianz and AXA, on the other hand, have maintained that theentire building can still be cleaned and repaired for $500 million,which is all the insurers would be responsible for. SabiaSchwarzer, a spokeswoman for Allianz, told NationalUnderwriter that there is no adequate proof of loss to showthat the building is contaminated beyond repair.

AXA representatives could not be immediately reached forcomments regarding the lawsuit, but AXA Chairman Henri de Castriestold reporters in Paris last weekafter discussing the company'slatest earnings resultsthat the lawsuit is “without merit.”

Ms. Schwarzer also noted: “We have been maintaining that allother surrounding buildings that were contaminated from the samesourcethe dust from the World Trade Center coming downhave beencleaned up and are now up and running and are populated.

“There is no conclusive data provided to say the building isbeyond repair. In fact, the Environmental Protection Agency hasalso done some independent studies of lower Manhattanalthough notspecifically of the Deutsche Bank buildingthat the dust can becleaned up,” she added.

The main difference in position, Ms. Schwarzer noted, is thatDeutsche Bank is saying the building is a total loss, while Allianzthinks the building can be cleaned up and repaired.

Ms. Schwarzer also complained that some in the media have beenunfairly saying insurers are obstructing the demolition of thebuilding, “which is simply not true.”

“As you can see in the complaint, Deutsche Bank is demanding asurgical demolition of the building,” she said. “That actuallywould take until the end of 2006, and the reconstruction wouldn'tbegin until 2007. So Deutsche Bank's plan would take much longerfor that site to be cleared in order to become part of the WTCreconstruction effort.”

Also, Allianz has already paid about $100 million in claims forthe substantiated property damage to the building, Ms. Schwarzeradded. “Allianz has already paid for damages that weresubstantiated, but those that are not [substantiated], we would notpay.”

Reproduced from National Underwriter Property &Casualty/Risk & Benefits Management Edition, August 18, 2003.Copyright 2003 by The National Underwriter Company in the serialpublication. All rights reserved.Copyright in this article as anindependent work may be held by the author.