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
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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
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