Among the many consequences of the Sept. 11 terrorist attacks will be a rash of lawsuits and unforeseen legal arguments, says Curtis Porterfield, a partner with Howrey Simon Arnold & White. Porterfield's firm has been retained by some of the companies in the World Trade Center that are seeking remuneration from insurers for business interruption losses.
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Porterfield warns that there will be many financial loopholes behind which insurance and reinsurance firms may try to hide, one being the Homeland Security organization that the government is forming to cover the costs of businesses' losses. And corporations may end up paying too much in insurance premiums if the government ends up footing part of the insurance claims arising from the attack, warns Porterfield, who in the past has represented such corporations as
in lawsuits against insurance companies.
Another question is whether insurance companies will try to invoke exclusionary clauses for acts of war to avoid paying claims, and Porterfield believes an entirely new legal specialty may arise out of the terrorist attacks, complete with its own Johnnie Cochrans and F. Lee Baileys.
Here are some of Porterfield's other thoughts on the forthcoming legal wranglings.
TSC: When are we going to start to see lawsuits related to Sept. 11?
Porterfield: Not until the insurance carriers decide to dig in, to protect the losses as they deem them to be. The losses can range from property losses at or near the area to business interruption losses, which will probably constitute most of the cases. A lot of television and radio stations operated off the broadcast antennas on top of the building. Another example would be if you could not open your restaurant.
Then there's the question of ingress and egress, otherwise known as access. It's where an action of the government prohibits you or your customers from gaining access to your company. Across the country, there were a lot of places where the government ordered evacuations of buildings or closed buildings down that they considered to be targets.
TSC: If the government was the cause of some of the business interruptions, wouldn't the insurance firms be relieved of their obligations to pay out on any policies covering business interruptions?
Insurance isn't about blame or fault -- it's about losses -- suffering a loss that was not anticipated by you. It is also meant to keep you whole no matter what happens. It has nothing to do with who's to blame for the underlying incident.
TSC: But there is something called the exclusionary clause whereby if an event is deemed an act of war, then an insurance company is excluded from the liability of payment. Now that the terrorism is continuing, can't insurers call upon a wartime exclusionary clause, should it be written into their policy?
I don't think these exclusionary clauses apply at all, and the reason for that is this: In a war exclusionary clause, the act of war is typically an action by a sovereign, or between two sovereigns, meaning by a nation or nations, using military force. This is clearly not a war act as we understand it in the insurance world. So far as we know, the acts of Sept. 11 and subsequently have not been an attempt to take over the United States.
It doesn't even come nearly within the definition of a war exclusionary clause. If these actions had been internal with the attempt to overthrow the government, that would have fallen within some of the other exclusions, such as the rebellion exclusions.
TSC: How are these events going to impact the insurance industry over the next few years?
The main issue will be how far out beyond Ground Zero should business interruption insurance apply. There's hardly a business in the United States that didn't get affected when they grounded all the planes.