NY Trade Center Ruling Exposes Equitas

A New York appeals court ruling yesterday that the Port Authority of New York and New Jersey is liable for damages from the 1993 World Trade Center bombing, opens the way for legal action over claims exceeding $100 million, an attorney said today.

“It's a very big liability, a very big exposure,” said attorney Andrew Carboy, who said the Port Authority coverage related to the case was through Equitas, the Lloyd's of London runoff entity.

A spokesperson for Lloyd's referred calls to the Berkshire Hathaway subsidiary National Indemnity Corp., which now reinsures Equitas liabilities. A request for comment from Berkshire drew no immediate response.

Steve Coleman, a spokesperson for the Port Authority, said the agency had no comment today. He said he would look into whether details of the coverage could be released.

Previously the Port Authority said only about 50 cases remain of the 575 that were originally filed over the 1993 explosion.

Mr. Carboy, who is with the Sullivan Papain Block McGrath & Cannavo firm in New York, said his firm represents many of the personal injury plaintiffs of which several dozen cases remain unsettled.

There are also, he said, a number of large business interruption claims from brokerage houses that involve substantial amounts, so the total value of open claims is “north of $100 million.”

Jeffrey L. Nagel, an attorney for the Port Authority, said no decision had been made whether to seek a right to appeal the case from the First Department Appellate Division of State Supreme Court in Manhattan to the state's highest court, the Court of Appeal in Albany.

In its ruling, the court unanimously upheld a 2005 jury finding that the Port Authority was 68 percent liable for the bombing and the terrorists 32 percent. Under New York State law, in cases where a defendant's liability exceeds 50 percent, plaintiffs are allowed to pursue them for 100 percent of damages.

The decision said the court sees “no basis to disturb the jury's apportionment.”

Mr. Carboy said he expected the Port Authority would move to appeal because the agency over the years had done everything they could to “gum things up.”

“The case went on for 15 years. It's been absolutely horrible for the people we represent. They are the forgotten act of American terrorism.” Unlike 9/11, he noted there has been no government victims' compensation fund.

As the case has dragged on, he said, it has been “out of Charles Dickens,” the author who detailed the evils of drawn out lawsuits in the novel Bleak House.

At this point, the attorney said even if the Appellate division approved an appeal, the high court might not entertain it because there have been no final civil verdicts to appeal. “There have been no damages.”

Mr. Carboy opined that one result of the decision is optimism, because the court recognized that in the face of terrorism “something could have been done and landlords have the ability to take these [protective] measures.”

In reviewing the trial evidence, the appeals court took note of the fact that the bi-state agency, which owned the Twin Towers, received 1985 engineering consultant report saying it was not merely possible but “probable” that there would be an attempt to bomb the Trade Center.

The report noted that WTC was “highly vulnerable” through its underground parking below the building, which was where the bomb exploded killing six people, injuring 725 and creating a massive crater.

In its decision the court said the Port Authority should have realized that it faced a “potentially monstrous risk.”

The court also noted that former Port Authority Executive Director Peter Goldmark had been warned of the risk by Scotland Yard.

An attorney who was not part of the case, Joshua Gold, a partner with Anderson Kill law firm in New York who represents corporate policyholders, said regarding the Port Authority's failure to take steps that it would still have insurance protection because “negligence does not negate your coverage.”

It would be different, he said, if they had shown reckless or deliberate misconduct. He said he doubted that a carrier could maintain the risk was not disclosed because “my suspicion is the underwriters did site inspections and loss engineering work.”

John Iten, an analyst at Standard & Poor's, said he had read there was potential liability of $50 million and he believed the Port Authority had self-insured some portion of liability. A $50 million loss, he said, did not seem like something that would have a significant impact on a single insurer, and it would have no impact on the industry.

Robert P. Hartwig, president of the Insurance Information Institute, e-mailed that in 2007 dollars, the 1993 WTC bombing resulting in insured losses of $849 million.

“There were obviously other costs not covered by insurance. It is unclear from anything I've read how much the court's decision could increase liability of insurers, if at all,” he said.