Crain's New York - April 29, 2013 - (Page 4)

REBUILDING NY Sandy victims turn to lawsuits BY LISA FICKENSCHER Hundreds of businesses hurt by Superstorm Sandy were kicked again when their insurance companies denied their claims for losses they suffered. Now they are seeking justice in the courts and through a state mediation program to help New Yorkers challenge insurance denials. Some are preparing lawsuits against their insurers, which may be filed as soon as the first week in May, while others may sue Consolidated Edison Inc., alleging negligence for Sandy blackouts,said several lawyers who are preparing such cases. But litigation is expensive and time-consuming. Most small businesses cannot afford it. “Filing a lawsuit isn’t going to get us anywhere quickly,” said Joseph Jean, a partner at Lowenstein Sandler, which is representing more than 20 companies whose claims were denied. “It guarantees five years of fighting.” Turning to mediation A faster, less costly alternative that many more businesses are turning to is the mediation program Gov. Andrew Cuomo announced in February, when he issued an emergency regulation requiring insurers to offer voluntary mediation for disputes over Sandy claims. That program got underway on April 10, and the number of businesses clamoring for it is growing by the day. Insurance companies are required to cover the expenses involved in the process, except for any legal costs the policyholder incurs in preparing its case. As of April 19,242 companies requested mediation, according to the American Arbitration Association, which is administering the program. The majority of the requests—143 cases—involve business-interruption insurance denials, with the average claim totaling $92,678. The New York Department of Financial Services is investigating more than 100 denials involving business interruption, the agency said in midApril. A spokesman for DFS, which regulates banking and insurance, did not return calls for comment. Many restaurants, hotels and retailers were told by their insurers that they were not covered by their business-interruption policies because the power failure they experienced after the storm was caused by a flood at the Con Ed substation on East 14th Street. Their policies excluded damage caused by a flood, they were told, even though their premises were never flooded. The insurance industry’s position is bolstered by Con Ed, which at the urging of insurance companies issued a 45-page explanation on Nov. 26 detailing the causes of the power outages in the city post-storm. “All outages in Manhattan were caused by flooding,” the report stated,“with the exception of two areas [in the financial district] that were preemptively shut down to preserve the integrity of the electric system.” A first for Con Ed A spokesman for Con Ed said insurance companies had asked for this information, which many have attached to denial letters sent to policyholders. The Con Ed document says the information is to be used specifically for “adjusting businessinterruption claims,” and it is the first time the utility has produced such a report, said the spokesman. Lawyers representing policyholders are arguing that the power outage in lower Manhattan, which affected thousands of businesses and residents below 39th Street, was caused by a widely publicized explosion. They say the explosion theory would invalidate the flood exemption being used against their clients. The Con Ed spokesman said the company would not comment on potential litigation, but he acknowledged that six lawsuits have been filed against the utility in the city and one in Westchester County. Ⅲ Discover True Client Service. Above and beyond is our starting point. Discover Excellence in Commercial Real Estate Services. Discover Cassidy Turley. Peter Hennessy President, New York Tri-State Region 212.318.9790 Peter.Hennessy@cassidyturley.com www.cassidyturley.com Project & Development Services / Tenant Representation / Project Leasing / Property Management / Corporate Services / Capital Markets 4 | Crain’s New York Business | April 29, 2013 by Aaron Elstein Carmelo Anthony Henrik Lundqvist newscom Small businesses fight insurers that denied their claims IN THE MARKETS MSG rides the playoff gravy train F or fans of the New York Rangers and New York Knicks, it’s the best time of the year. Both teams have made the playoffs and will go as far as Henrik Lundqvist and Carmelo Anthony can carry them. For the suits who run Madison Square Garden Co., the playoffs are special for another reason: Analysts say they’re the difference between profitable seasons for the teams and break-even ones. Here’s a tutorial on what playoff games mean to MSG’s business. Each home playoff game generates $2.3 million in revenue for the Garden, according to brokerage firm Albert Fried & Co. An extended run, like the one enjoyed by the Rangers last year when they advanced to the Eastern Conference finals, generated about $25 million in extra revenue because it meant 11 additional hockey games at MSG. (The Knicks were eliminated quickly by the Miami Heat last year and hosted only two home games.) Now, $30 million in unplanned revenue might seem like a blip considering MSG generated almost $1.3 billion in sales last year. Look closer, though, and you’ll see it accounts for about a fifth of the company’s $100 million revenue increase last year.(Playoff revenue was about $20 million higher than in the 2010-11 season, when both the Knicks and Rangers were knocked out in the first round.) Of course, making the playoffs regularly—and both the Knicks and Rangers have made it for three straight years now—means MSG can charge more for tickets for each of the teams’ 41 regular-season games. And certainly it has done that. Over the past two seasons, prices for Knicks season tickets have soared 54%,and MSG said in March that prices would rise by an average of 6.4% next season.Rangers seasonticket prices have risen by 30% over a similar two-year period and will creep up by another 4% next season. Neither team had the leverage to command these sorts of prices when they were suffering playoff droughts only a few years ago. Perhaps even more important, success on the court or rink translates to higher broadcasting revenue. MSG’s cable channel is already the second-most-valuable regional sports channel,behind only the Yankees’ YES Network, and it generated $336 million in revenue last year, according to research firm SNL Kagan. That’s a 19% increase over 2011. Considering that cable carriers are forking over everhigher fees for sports programming (and charging customers accordingly), look for MSG’s broadcast revenues to ramp even higher. There simply aren’t many better businesses in the city than the Garden’s right now, and the company’s stock price has jumped 64% in the past year,closing Friday at about $56 a share. Needham analyst Laura Martin last week raised her price target to $66 a share, suggesting there’s more room to run no matter how far the Knicks or Rangers go this spring. Perhaps the gravest risk faced by Garden executives is that the city will somehow force them to move their arena after they spent $1 billion on renovations so that miserable Penn Station can be improved. Much more likely is that the Knicks and Rangers will revert to their losing ways. Ⅲ The Garden generated $1.3B in sales in ’12 http://www.cassidyturley.com http://www.cassidyturley.com

Table of Contents for the Digital Edition of Crain's New York - April 29, 2013

IN THE BOROUGHS
IN THE MARKETS
THE INSIDER
BUSINESS PEOPLE
REAL ESTATE DEALS
SMALL BUSINESS
OPINION
GREG DAVID
REPORT: EDUCATION
THE LIST
FOR THE RECORD
CLASSIFIEDS
NEW YORK, NEW YORK
SOURCE LUNCH
OUT AND ABOUT
SNAPS

Crain's New York - April 29, 2013