August 3, 2006

By KATHERINE MANGAN

With the one-year anniversary of Hurricane Katrina rapidly approaching, Loyola University New Orleans has sued its insurance company for failing to pay its claims for millions of dollars in property damage and other losses. Loyola follows in the footsteps of Tulane University, which has also sued one of its insurers.

Loyola has received only a $4-million advance from the Continental Casualty Company, a division of CNA Financial Corporation, despite spending more than $200,000 to have its losses calculated and authenticated by a national accounting firm, the university contends in a lawsuit filed in federal court in New Orleans on Wednesday. Those claims were sent to the insurer in April.

Michael St. Martin, a 1967 Loyola graduate who is representing his alma mater pro bono, said the insurer paid the advance with the caveat that it would demand the money back if it determined the losses were not caused by a "covered event."

"If this is not a covered event under the policy, what would be -- an atomic explosion?" he asked. He added that state law requires parties to file claims within a year of the event that caused the loss. Katrina made landfall August 29, and the ensuing disaster forced colleges and universities throughout New Orleans to cancel their fall semesters, lay off faculty and staff members, and dig into their reserves to pay for repairs.

According to the lawsuit, Loyola's uptown New Orleans campus suffered $6-million in property damage and $22.5-million in lost income as a result of having to close for the entire first semester of the 2005-6 academic year. Enrollment was also down by about 1,000 students for the spring semester, costing the university another $25-million in lost tuition.

"Loyola took out business-interruption insurance and paid for years without a claim," Mr. St. Martin said. "Then Katrina comes along and wipes out three quarters of the city; there is no electricity, no sewage or water; about half of the faculty and staff have lost homes; and the reason the insurance company tells me it hasn't paid the claim is they want to know why Loyola didn't reopen after the hurricane."

"You tell me, who's going to go to the school, how will they get there, and where will they live?"

Katrina Parker, the director of corporate media relations for CNA, said the company does not comment on pending litigation.

Loyola is seeking class-action status for the lawsuit to help small businesses that are also insured by CNA and might not be able to afford to sue on their own. "I think there are hundreds of small businesses out there" that could potentially join, Mr. St. Martin said.

Loyola's next-door neighbor, Tulane University, is facing a similar legal battle. Last month, Tulane filed a countersuit against its insurer, Allianz Global Risks U.S. Insurance Company, to recover $250-million the university says it is owed.

Tulane officials say the university suffered $400-million in damages from Hurricane Katrina. The university recovered $100-million from two of its other insurers -- Lexington Insurance Company and Zurich American Insurance Company.

Allianz, on the other hand, sued Tulane in federal district court in March, denying coverage for the university's losses under its "excess property and business income" policy. Tulane filed the countersuit in response.

"Shortly after Hurricane Katrina, Tulane provided unfettered access to our insurers, including Allianz, so they could independently document the university's losses," Victoria D. Johnson, Tulane University's general counsel, said in a written statement.

Allianz officials could not immediately be reached for comment.