City recovers $800,000 in Sandy relief

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The city recently settled a lawsuit that it filed against its insurance carrier in an effort to offset revenue losses after Hurricane Sandy, including its typically lucrative beach season.

In 2014, the city filed a lawsuit against Boston-based Lexington Insurance Company, a subsidiary of AIG, after it was denied a claim for business and service interruption losses totaling $3.2 million.

“We just combined what we felt were our lost revenue streams, based on an economic analysis that our previous comptroller had conducted,” said Corporation Counsel Rob Agostisi, adding that the lost revenue resulted from services and programs that were disrupted due to the storm. “The big one was the beach … the whole beach was a construction zone, and we lost revenue because of that.”

As part of the settlement in U.S. District Court in New York’s Eastern District, Lexington agreed to reimburse the city $800,000 last month for business interruption losses in 2013.

The city had a $25 million policy under Lexington when Sandy hit. In November 2012, Lexington reimbursed the city $10 million, the full cap on flood-related damage, in addition to $131,600 for wind damage, money that Agostisi said was critical, allowing the city to launch its cleanup and rebuilding efforts.

“This was the first cash influx to the city after the storm — it’s what we used literally to keep the lights on and for down payments on all other contracts,” he said. “This was the first money the city saw, and we saw it happen within 30 days, which was a big coup.”

In April 2013, however, the city submitted another claim under the policy for business interruption costs. AIG argued that the claim was covered by the $10 million payment.

After the claim was denied, in October 2014, the city filed a lawsuit against Lexington in Nassau County State Supreme Court. The case was subsequently moved from state to federal court, and the city and Lexington remained locked in a jurisdictional dispute regarding the proper venue for the case.

The city and Lexington subsequently agreed to mediate the dispute before attorney Michael Levy, and Levy successfully persuaded the parties to settle.

“After years of hard work that dates back to Sandy, it’s very gratifying to see such a favorable outcome for the taxpayers,” Agostisi said.  “There were some disputes along the way relative to business interruption expenses, but Lexington did right by its client in the end.”