Public officials are eyeing the $1 billion set aside in an insurance fund to cover New York City against negligence lawsuits related to 9/11 for other potential uses. But tapping into that money may present more than a few problems.
Mayor Michael R. Bloomberg proposed this week that the $1 billion be put into a victims’ compensation fund for the thousands of people who claim they were hurt working at ground zero.
Mr. Bloomberg argued that it would be better to make payments directly to injured workers than to spend the money defending the city and its contractors against thousands of lawsuits.
Judge Alvin K. Hellerstein of the United States District Court in Manhattan, who is charged with overseeing more than 7,000 of those lawsuits, recently urged lawyers from both sides to come to a settlement that would cap the liability of the city and its contractors who worked at ground zero at $1 billion. Individual compensation awards taken from that money would then be decided by court-appointed special masters.
Senator Charles E. Schumer wants the $1 billion to go to sick workers as quickly as possible. And Kenneth R. Feinberg, who ran the original September 11 Victim Compensation Fund, has volunteered to administer a new fund financed with the $1 billion insurance pot. The original fund distributed $7 billion to the families of those killed or hurt in the attacks or injured in the immediate aftermath.
The insurance money is often mistaken for a compensation fund but has a very different function, making it legally difficult to transfer for another use. The money was allocated by the Federal Emergency Management Agency in 2003 to create a state-chartered insurance company whose only clients are the city and about 100 contractors who had workers at ground zero.
“We are a third-party liability insurer, with duties and obligations to our insureds,” said Christine LaSala, who is president of the WTC Captive Insurance Company. (A captive insurance company is essentially a regulated form of self-insurance, which is typically used by cities and professional groups.)
The company is licensed by the New York State Insurance Department; it has offices in Lower Manhattan and has a board of directors, bylaws and the structure of a stand-alone insurance company.
The insurance fund is often confused with the Sept. 11 fund, which was created by Congress to protect the airline industry from financial ruin.
Under the terms of the original victims’ fund, which basically had no cap, victims’ families agreed not to sue the airlines in exchange for direct compensation.
The $1 billion insurance allocation, by contrast, was a response to the city’s inability to find sufficient insurance coverage against negligence suits in the commercial market. The company has already spent more than $30 million defending the city and its contractors.
The victims’ compensation fund had strict eligibility requirements, limiting participation to the families of those who died or who, within four days of the attack, sought medical treatment for injuries suffered while working at ground zero.
Establishing eligibility requirements for the thousands who worked in the recovery and cleanup operations, which lasted for nine months, would be far more complex, especially since some respiratory and digestive problems may not arise for years after exposure.
Deciding when such ailments began and whether they could reasonably be traced to exposure to harmful air would be a difficult and time-consuming task.
There could be other problems. Lawyers representing thousands of workers who have already filed lawsuits against the city have argued that $1 billion would not cover the costs of compensating people who have become ill.
Congress would have to approve transferring the insurance money into a new compensation fund.
Mr. Bloomberg has said that as a condition of transferring the money, any new legislation should grant the city and its contractors immunity from 9/11 negligence lawsuits now and in the future. There may be resistance to such a law because so many lawsuits have already been filed. Aides to federal lawmakers say Congress may hesitate about moving forward unless there is a guarantee that the federal government will provide enough money to compensate all victims.
In 2003, Representative Carolyn B. Maloney and other members of Congress introduced a bill to establish an entirely new compensation fund for injured workers. The bill, which has not been acted on, would have open-ended funding tied to need, and would allow the captive insurance company to remain in place in case more serious illnesses develop in years to come.
“We need a victims’ compensation fund with the ability and the resources behind it to resolve all the compensation problems and get the help to those that need it, responders and residents,” Ms. Maloney said yesterday.
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