Judge Hellerstein Nixes WTC Captive Settlement

At a hearing on Friday, he also said the amount wasn't enough to compensate the 10,000 victims.

The proposed settlement had been announced March 12, by the Captive and it was hailed then by New York Mayor Michael R. Bloomberg as being a "fair and reasonable resolution to a complex set of circumstances."

In the proposed settlement, an initial $575 million award would increase if 96 percent or more of all plaintiffs with claims opted into the settlement. If all plaintiffs agreed to the settlement, an additional 10 percent of $575 million–or $57.5 million, would be due. In addition, $25 million in contingent payments would be paid in installments of up to $5 million per year over the next five years–depending on how many new claims were filed, how much was spent on paying the claims of those not accepting the settlement and other related claims against the City. The possible maximum totaled $657.5 million.

But after hearing from nine persons who claimed injury during the World Trade Center cleanup, Judge Hellerstein said that while people "want to get on with their lives, what I'm going to say is going to suggest some delay, but I nevertheless want to say this. In my judgment, this settlement is not enough."

In a statement, Christine LaSala, president and chief executive officer of the WTC Captive Insurance Company, said:

"I am very disappointed that the Judge has now made it more difficult, if not impossible, for the people bringing these claims to obtain compensation and a settlement. We heard people today plead for an end to this litigation that was fair and just. That is what we focused on and achieved."

"We will consider what the Judge has said and consult with our insureds and try to find a way forward."

Judge Hellerstein, according to a transcript of the hearing, said ordinarily such settlements would be between the parties to decide, but that "This is different. This is 9/11. This is a special law of commons. This is a case that's dominated my docket, and because of that, I have the power of review. If I don't think it is fair, I'm going to tell you that, and you will make the judgment how to deal with it."

By comparison, the September 11^th Compensation Fund of 2001 created by Congress made distributions without delay or attorney fees. He observed, "every plaintiff here, according to this agreement, is burdened by a lawyer's fee that's hard to gauge and will take a very large bite out of his recovery…This is eight years later and with very large legal fees."

Because of this, he said, "Number one, in my opinion, just as the captive insurance fund and the private insurers of the city paid the city's expenses and in effect fueled this vigorous and aggressive defense, so they should pay the plaintiffs fee."

Secondly, he said, while the attorneys deserve "a reasonable and perhaps even generous fee. In my judgment, they are not entitled to their contract rights of a third, thereabouts. So I will fix the reasonableness of the fee, and the fee will be payable by the captive insurance, and that amount of money will be available for distribution to the plaintiffs."

Another point he made was that the captive's $1 billion insurance fund appropriated by Congress was to protect the city against the claims of those who lost their health–and in some cases their lives–responding to 9/11. He noted it must be determined how much of the amount should be spent and how much reserved for those claims still to come.

Judge Hellerstein did not give dates, but said there will be judicial approval of the allocation of funds, adding there also will be transparency and accountability, "all under judicial supervision."