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NYC mayor proposes WTC Captive shutdown

NYC mayor proposes WTC Captive shutdown

NEW YORK—WTC Captive Insurance Co. would be shuttered and its $1 billion in funding for potential claims shifted to a victim compensation fund, under a proposal unveiled last week by New York City Mayor Michael R. Bloomberg.

The mayor's proposal to close WTC Captive--part of a broad plan to improve the public health response for individuals suffering from health problems stemming from the Sept. 11, 2001, terrorist attacks--further calls for blanket immunity from current or future liability claims against the captive's insureds arising from the cleanup of the World Trade Center site.

WTC Captive, which is managed by Marsh Management Services Inc., was created with $1 billion in federal funding in December 2004 to provide otherwise unavailable liability coverage--including general, environmental, professional and marine liability--to the city of New York and some 100 contractors who worked to clean up the site.

The New York-domiciled captive has been a source of controversy, with some state officials accusing it of systematically denying claims, and the company's operations even becoming the subject of a federal investigation (see sidebar).

But the captive and its president, Christine LaSala--a former managing director at Marsh--have argued that the company has merely done its job by defending its insureds against improper claims.

"The captive is perfectly willing to settle litigation brought against its insureds when the relevant facts and circumstances are fully developed," a spokesman said.

To date, WTC Captive has faced more than 8,000 lawsuits. Only one case has been settled so far, for an amount of $45,000. That agreement was reached in late 2006, the spokesman said.

Meanwhile, he noted, the captive has spent more than $30 million in legal fees defending suits alleging liability by the city or its contractors for Sept. 11-related illnesses, including respiratory and other problems.

Mr. Bloomberg's proposal last week said Congress should pass legislation to liquidate WTC Captive and permit its funds to be reallocated to a victim compensation fund.

That fund, which was closed in June 2004, acted as a litigation alternative for victims of the attacks, providing more than $7 billion in compensation to claimants through a no-fault claims process.

As part of his proposal, Mr. Bloomberg said any such congressional action would also need to eliminate liability for the city and its contractors--which have previously filed motions in federal court to dismiss all claims based on state and federal immunity laws.

The roughly $1 billion from WTC Captive that would be funneled into the reactivated fund would only be a start, and additional federal funding would be needed, a spokesman for Mr. Bloomberg said.

David Worby, an attorney with Worby Groner Edelman L.L.P. who represents the plaintiffs suing WTC Captive's insureds, said he is in favor of shutting down the captive and reopening the compensation fund, even if it means blanket immunity for the city and contractors. "Anything that puts funds into the hands of my 9,000 clients, especially the ones who do not have insurance coverage, is a great idea," Mr. Worby said. "The sooner the better."

In a statement, New York Gov. Eliot Spitzer said he "wholeheartedly" supports Mr. Bloomberg's proposal, while some of New York's lawmakers--including Democrats Sen. Hillary Rodham Clinton, Rep. Jerrold Nadler and Rep. Carolyn B. Maloney--have also expressed support.

Whether the proposal will gain a wider backing and Congress will ultimately pass legislation to reopen the compensation fund remains to be seen, but WTC Captive is prepared to shut its doors.

"This is not a case where the company is trying to stay in business--it would be more than happy to go out of business, following the enactment of an appropriate victims compensation fund and, related to that, the granting of immunity to the city and its contractors from any current or future civil action related to the post 9-11 recovery and debris removal," the captive's spokesman said.