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Allianz fights school's claim over damage from Katrina

Allianz fights school's claim over damage from Katrina

NEW ORLEANS—An excess property insurer of Tulane University is asking a court to rule that it has no liability for more than $100 million of the school's Hurricane Katrina losses, making Tulane among the latest Gulf Coast policyholders to tangle with an insurer over Katrina-related claims.

Allianz Global Risks U.S. Insurance Co. filed suit against Tulane last week in New Orleans federal court, seeking a declaratory judgment that its policy does not cover flood damages and that Tulane's insured losses do not exceed the attachment point of the insurer's layer in the $450 million property program.

While underlying insurers, which have already paid their limits to the university, provided varying degrees of flood coverage, the Allianz policy excludes flood losses, the insurer argues.

A Tulane spokesman would say only that university officials are reviewing the complaint and are confident in their coverage position.

Katrina claims have already sparked numerous coverage battles, many involving disputes over the extent of policies' flood coverage.

Xavier University of Louisiana, another New Orleans school, with more than 4,000 students, sued Travelers Property Casualty Co. of America earlier this year for coverage for property damage and lost business income that the school estimated at more than $30 million.

Several other New Orleans-area commercial property owners are similarly embroiled in disputes with insurers, including a residential real estate management company; two retail mall owners; a local operating engineers' union; and a Covington, La., law firm. In addition, San Francisco-based Kimpton Hotel & Restaurant Group Inc. is suing Liberty Mutual Fire Insurance Co. to recover more than $10 million in flood damage to its Hotel Monaco in New Orleans, court records show.

Mississippi Attorney General Jim Hood last year sued numerous insurers for refusing to honor policies that he says should cover damage from the storm surge pushed ashore when Katrina hit the Gulf Coast last Aug. 29.

In Gulfport, Miss., federal court, the owners of the Hard Rock Hotel & Casino Biloxi are likewise suing two of the casino's insurers for refusing to pay Katrina-related damage.

Tulane, the largest private employer in New Orleans, reopened for classes in January, five months after Katrina caused damage that the university calculates to be more than $200 million.

The school's uptown New Orleans campus, attended by more than 11,000 students, covers 110 acres and includes about 80 buildings.

"Almost every building on campus had some kind of damage," ranging from roof damage to-in one case-the partial destruction of an external wall, a Tulane spokesman said. Most major repair work at the campus has been completed and all of its buildings are being used again, the spokesman said.

Tulane's $450 million in property coverage comprises a $25 million primary policy written by the Lexington Insurance Co. unit of American International Group Inc., along with three excess layers.

Zurich Insurance Co. provided a $75 million limit above the primary layer, Allianz wrote a $250 million limit excess of the Zurich layer and ACE American Insurance Co. wrote the top excess layer of $100 million, according to the Allianz complaint.

Tulane notified its insurers of the damages to its campus soon after Katrina hit, and Lexington and Zurich have since paid the combined $100 million limits of their policies, the suit notes.

Tulane then advised Allianz that the school's Katrina losses would exceed the attachment point of Allianz's layer, and on March 28 forwarded a request for a partial payment of $100 million from the insurer.

Allianz responded with the declaratory action, filed March 31 in U.S. District Court in New Orleans.

While the Lexington and Zurich policies provided flood coverage to varying extents, the Allianz policy excluded all losses resulting from flood, according to the complaint and Lawrence T. Hofmann, a partner with Zelle, Hofmann, Voelbel, Mason & Gette in Minneapolis, who represents Allianz.

Allianz contends that Tulane's losses in excess of $100 million resulted from flooding, Mr. Hofmann said.

An AIG spokesman confirmed that Lexington had paid its limit to Tulane. A Zurich spokesman declined to comment other than to say that Zurich had fulfilled its obligations to Tulane.

Allianz has asked the court to rule that its policy excludes flood losses and that Tulane did not sustain any losses excess of $100 million that are covered by the Allianz policy.