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NEW YORKWTC Captive Insurance Co. has wasted and misused its $1 billion in federal funding on legal and administrative fees instead of compensating injured Ground Zero workers, charges a lawsuit filed in a New York court last week.
The lawsuit, brought on behalf of three plaintiffs, claims that "Despite the payment of tens of millions of dollars for claim defense and administration, not one penny has been spent to compensate workers injured by exposure to toxic substances during their heroic work at Ground Zero."
New York City officials hold that the captive was formed to provide liability coverage for the city and its contractors and was not intended to act as a victims' compensation fund.
The suit was brought by two former New York City police detectives, Frank Maisano and John Walcott, and Mary Bishop, a former health care worker assigned to the World Trade Center site following the Sept. 11, 2001, terrorist attacks.
Seeking millions of dollars in damages, the suit accuses the New York-domiciled WTC Captive of misusing public funds by spending more than $74 million on legal and other fees to fight injured workers' claims.
Further, the suit alleges the captive violated the federal Freedom of Information Act to hide its misuse of public funds and violated its fiduciary duties to protect and dole out funds for the benefit of injured workers at the Trade Center site.
Attorneys for Ground Zero workers have long argued that the $1 billion in federal funding that was used to create the WTC Captive should be used for medical treatment and compensation of workers injured by their participation in the cleanup efforts at the World Trade Center site.
WTC Captive, meanwhile, has maintained that the mandate under which it was created requires the entity to defend its insureds--New York City and a host of contractors--against potentially improper claims.
Founded in December 2004, the captive was created with $1 billion in federal funding to provide the city and contractors at the site otherwise hard to come by liability coverage, including general, environmental, professional and marine liability.
The city was, however, able to buy about $79 million in primary and excess coverage for the debris removal project; Liberty Mutual Insurance Co. is the lead insurer on the primary layer and excess insurance was obtained from the London market under two policies, court documents say.
To date, more than 10,000 lawsuits have been filed against WTC Captive by workers at the site and their families. The number of settlements the captive has reached is unclear, but the captive so far has only paid claims related to orthopedic injuries, as opposed to respiratory illnesses.
Marc J. Bern, an attorney for the workers with Worby Groner & Napoli Bern L.L.P. in New York, said the suit needed to be filed "because the captive insurance company has been acting recklessly and failing to do what was intended of them with the billion plus dollars that was given to them by Congress...we are asking that the board of directors be replaced and the control of the captive be taken away from Mayor Bloomberg."
In addition to the WTC Captive, the suit also names as defendants New York City Mayor Michael R. Bloomberg; WTC Captive President and Chief Executive Officer Christine La Sala; WTC Captive Chief Financial Officer and Treasurer James Schoenbeck; Marsh Management Services Inc., the captive's manager; and GAB Robins North America Inc., its third-party claims administrator.
Individuals named in the suit also include members of the WTC Captive's board: Lewis Finklestein, Jeffrey Friedlander, Meredith Jones, Mark Melson, and Marc Page.
In a statement, WTC Captive called the lawsuit "completely without merit," and said any suggestion that it has departed from its mandate or not faithfully performed its duties is "completely without basis in fact."
Spokesmen for Marsh Inc. and GAB Robins, both based in New York, declined to comment on pending litigation.
"The truth of the matter is Congress didn't set up a victims compensation fund...they set up a captive insurance company and the insurance company can only pay out monies if somebody sues us in court and wins a judgement against us," Mr. Bloomberg said to reporters following the filing of the suit. "But we've asked Congress to change the insurance company to a victims compensation fund," he noted.
In February, Mayor Bloomberg proposed that Congress pass legislation to liquidate WTC Captive and permit its funds to be reallocated to a victim compensation fund. Any such congressional action would also need to eliminate liability for the city and its contractors, Mr. Bloomberg said (BI, Feb. 19).
"If such legislation were enacted and were to provide an alternative to litigation, it would presumably call for the $1 billion FEMA grant with which the WTC Captive Insurance Co. was funded to be reallocated to a reinstituted Post 9/11 Victim Compensation Fund, an outcome the captive would expect to support," WTC Captive said in its statement.