A New York captive insurer, formed to cover the liability of NewYork City contractors and subcontractors involved in the WorldTrade Center debris cleanup, said those officials faulting the wayit conducts business do not understand its purpose.

|

The WTC Captive Insurance Company Inc., backed by $1 billion infederal money, was hit with a letter last week from New YorkInsurance Superintendent Howard Mills, demanding that the NewYork-domiciled operation send his department a "detailed analysisof claims paid and expenses incurred" since the captive'sinception, July 2004.

|

Mr. Mills wrote, "Few, if any, claims have been paid, butsubstantial sums have been expended by your organization since 2004for professional services."

|

His letter follows criticism by U.S. Sen. Chuck Schumer, D-NY,quoted in various news media as saying that WTC Captive isneglecting first responders rather than compensating them for theirillnesses.

|

The superintendent's letter, addressed to Ms. Christine LaSala,president and chief executive officer of the captive, said thedepartment is "concerned that the approximately $1 billion paymentto the WTC Captive Insurance Company from the federal governmentmay not be used in accordance with its intended purpose...to insureNew York City and the various contractors, subcontractors andothers New York City engaged during that tumultuous time againstclaims arising out of the debris removal process that beganimmediately in the aftermath of Sept. 11, 2001."

|

In a letter responding to Mr. Mills obtained by NationalUnderwriter, dated Aug. 1, Ms. LaSala explained that Congress'intent in forming WTC Captive "was to fill a gap in insurancecoverage that would ordinarily have been purchased from commercialinsurers."

|

The letter continued that in the case of the rescue, recoveryand debris removal after 9/11, "there was insignificant insurancecoverage available in the commercial markets."

|

The captive, it said, was "funded by FEMA and licensed by theNew York Department of Insurance as a third-party liabilityinsurer, providing liability insurance through a retroactivepolicy." As is typical for third-party liability insurance, "thepolicy includes a 'duty to defend'--to provide and pay for legalcounsel for WTC Captive's insureds in case of lawsuits."

|

The letter also noted that the department's letter "does notrefer to any material available to your office and previouslyprovided by the captive as a matter of course, such as ourquarterly reports. These reports provide claim and other financialinformation."

|

WTC Captive told NU that it is a "unique insurance company witha unique mission." The mission is to "insure and thereby protectthe city and the contractor and subcontractor policyholders asthese claims are processed, adjudicated and resolved." The fund, itsaid, is so that if the city, contractors or subcontractors aresued by people claiming to have injuries, funds would be availableto cover any payments that the city or contractors might have tomake, in the absence of any other commercial liability coverage.The captive would be the source of coverage to settle anyclaims.

|

The information states that the captive was "not formed to be avictims' compensation fund or a social insurance fund." Employeesof the city, contractors and subcontractors who may have injuriesresulting from 9/11, the information said, have access to workers'compensation, and to individual companies' health care andlong-term disability benefits and other forms of compensationoffered by their employers.

|

According to the captive, approximately 8,000 claims have beenor are expected to be "tendered to the captive."

|

But the operation has been tied up by a lawsuit seeking tocreate class action on behalf of all claimants.

|

U.S. District Court Judge Alvin K. Hellerstein, in Manhattan,who is handling most of the cases involving illnesses and injuriesallegedly sustained during the WTC cleanup, has a decision pendingon whether a class should be certified.

|

The captive has argued that the lawsuits should be dismissedbecause the law grants immunity against such actions. JudgeHellerstein is expected to render a decision on the dismissalmotion within the next several weeks, according to the captive.

|

Information supplied by WTC Captive said the judge "has made itclear that due to the unique nature of each individual claim...hedoes not believe a class action or other attempt to aggregateclaims is appropriate."

|

Ms. LaSala is a former partner at insurance broker Johnson &Higgins. Her operation, the captive said, includes "a smallin-house professional staff and a team of outside professionalservice firms."

|

WTC Captive was funded with close to $1 billion in federal fundsprovided through a grant from the Federal Emergency ManagementAgency (FEMA). The funds are part of the $20 billion of such fundsauthorized by Congress to help New York City and its people recoverand rebuild after 9/11, the information said.

Want to continue reading?
Become a Free PropertyCasualty360 Digital Reader

  • All PropertyCasualty360.com news coverage, best practices, and in-depth analysis.
  • Educational webcasts, resources from industry leaders, and informative newsletters.
  • Other award-winning websites including BenefitsPRO.com and ThinkAdvisor.com.
NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.