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BY STEVE TUCKEY, who has written on insurance issues for a decade for several national media outlets

The thousands of first responder and cleanup workers suffering debilitating illnesses stemming from their efforts at the World Trade Center in the aftermath of the attacks of Sept. 11, 2001, will have a lot to think about this month as they ponder a settlement that will provide nearly $1 billion for their claims, but could shut them out of a future and more generous payout.

At stake are not only the health and welfare of the nearly 10,000 police and fire officers and cleanup workers, but also important questions of immunity and liability of the municipal government and its contractors, which may be called upon to take up similar tasks in future disasters.

If 95 percent of the plaintiffs give their approval by Sept. 30, payments could begin within weeks. Otherwise, the settlement is off.

Parallel efforts in Congress to compensate not only cleanup workers but all persons affected by the Sept. 11 attacks could complicate the approval process. Double-dipping prohibitions in the measure would prevent workers who take the city money from seeking payments from any new federal compensation fund.

Kenneth Feinberg, who now has his hands full administering the $20 billion fund set up for victims of the BP Gulf oil spill, will play a similar role in the WTC settlement fund. He joined the chorus that urged Congress not to force workers to make such a choice. With that outcome unlikely, he urged the plaintiffs to settle for the bird in hand.

"It is doubtful they would do any better by waiting for the proposed legislation," Feinberg wrote in an op-ed piece in the New York Times following the settlement. "But hope springs eternal, and some plaintiffs are being told that it would be preferable to wait.

Marc Bern, a senior partner in the law firm representing the plaintiffs, urged lawmakers to simply reduce whatever federal award is granted by the amount obtained from the city settlement.

But U.S. Rep. Carolyn Maloney, D-N.Y., said such a move would put the bill in serious jeopardy.

"Regretfully, it would be unprecedented to allow those who settle a case to go back and seek additional compensation for the same case," she said in a statement to the Associated Press.

Plaintiffs who agree to the revised settlement should do so "on the merits of the settlement itself," she said, not on the promise of possible future changes to the law.

The U.S. Zadroga Act, named after Det. James Zadroga, the New York City detective who was the first first responder to die from his WTC-related illness, would provide $5.1 billion for medical care.

The money would be for an estimated 70,000 responders and nearly 20,000 people who lived and worked in the area. While the dollars are much larger, so is the pool of claimants.

Bern said that placing a bet on the bill's approval was a dicey strategy considering its slim chance of passage. "Given the current economic climate, many in Congress are reluctant to pass the Zadroga Act until the nearly $1 billion captive insurance fund is distributed to cover healthcare costs. At the same time, the city of New York and its contractors will not expend all of these dollars for healthcare until they know what their long-term liability will be," he said.

In March, Hellerstein rejected a $657 million settlement sum and came under fire for the activist role he played in the effort. In addition to upping the final sum, he also got the lawyers to reduce their fee percentage from 33 percent to 25 percent.

A claims administrator will review medical records and work history for each case and decide the amounts to be paid to each plaintiff. Someone with severe asthma, for example, would stand to receive more money than someone with cancer because the illness could be more directly tied to the debris removal.

Patients who fear they may become ill but are not currently sick will be eligible for a $3,250 payment, while up to $2 million may be eligible for survivors or next of kin if they can prove a causal link between the death of their loved one and the cleanup activities.

Margaret Warner, the attorney for the WTC Captive, said many of the alleged illnesses were medically unlikely to have been caused by exposure at the WTC site.

"This settlement avoids the necessity of each plaintiff proving causation, but we valued higher claims that were more plausibly related," she said.

The June 23 settlement represents a milestone, but certainly not a conclusion, to the long-running legal wrangle of just who should cover the costs of the illnesses to the first responders and contractors who cleaned up the carnage in lower Manhattan through June of 2002.

The WTC Captive was born in July 2004 in the absence of commercially available insurance to cover both New York City and nearly 140 contractors, subcontractors and others it engaged against claims arising out of the debris removal process.

A $1 billion grant from the Federal Emergency Management Agency funded the captive that was put under the control of New York City Mayor Michael Bloomberg, who appointed its board. "The mission of the WTC Captive is to insure and defend in court, and thereby to protect the city and contractor and subcontractor policyholders as claims are processed, adjudicated and resolved," was how a WTC Captive press release put it.

Former Johnson & Higgins insurance broker Christine LaSala took over as president and CEO of the captive and soon became the brunt of criticism from elected officials who did not see the mission of the captive as a body to merely turn down claims.

In filing a 2007 lawsuit to release some funds for injured workers, Bern dismissed LaSala's contention that the captive was merely a legal defense fund.

When she announced her resignation, which she subsequently took back, in January of 2008, U.S. Rep. Jerrold Nadler, D-N.Y., who represents the World Trade Center site in Congress, had few kind words.

"Anyone who is proud of the fact that the fund has more money now than when it first started fundamentally misunderstands its purpose. The funds were provided to help workers who continue to suffer because of their exposure at Ground Zero, without bankrupting the city and its contractors," said Nadler.

"While Ms. LaSala protected the city and its contractors, she clearly failed to help the workers. I strongly urge the captive board to select a new president that will fulfill the fund's original intent and mandate."

Nonetheless, LaSala remained steadfast that the captive's first responsibilities were to her insureds, the city and its 144 contractors.

Speaking at a Captive Insurance Companies Association meeting in early 2007, LaSala defended the captive's role in protecting the city and its contractors' immunity from such suits. Important precedents regarding future government remediation activities were being established, LaSala argued.

In the end, though, she urged the plaintiffs to approve the settlement.

Attorney James Tyrell, representing the settling defendants other than the city, raised the "duty to defend" issue when he warned plaintiffs against rejecting the settlement in favor of more litigation.

"If these cases go to trial, the defendants can and will assert the defenses available to them," he said in a statement. "They, too, came to the aid of the people of New York and all they have to show is that they acted with reasonable care under the circumstances."

Meanwhile, hundreds of defendants and thousands of plaintiffs in WTC-related cases remain outside the scope of the settlement.

Hellerstein issued a suspension of all such litigation, even though lawyers in the cases urged that the cases be moved to the discovery phase. Many of these defendants also have commercial coverage that may be called upon to contribute to settling plaintiffs claims, according to a WTC Captive statement.

September 1, 2010

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