Insurer may take $90 million charge over World Trade Center dispute

Posted 7:47AM on Wednesday 1st May 2002 ( 23 years ago )

CHICAGO - Aon Corp., an insurance broker that lost 176 workers in the World Trade Center attacks, confirmed Tuesday it may take a $90 million hit if it loses a dispute with Lloyd's of London over liability in the tragedy. Aon officials say the company set aside that amount because of a recent court ruling that means it could be responsible for $90 million of the total $100 million in insurance benefits that it's paying out to the families of the employee victims. In its quarterly earnings report, it characterized the reinsurance it is seeking from Lloyd's as "potentially uncollectable." Lloyd's officials were not available for comment Tuesday. Aon's largest regional office, with 1,100 employees, was located in the upper floors of World Trade Center Tower 2, which collapsed after terrorists flew an aircraft into the building Sept. 11. Under its insurance policy - written by its subsidiary, Combined Insurance Co. of America - Aon is paying up to six years' salary to the employees' survivors. It contends the bulk is the responsibility of Lloyd's because acts of terrorism were specifically cited in the policy. But Lloyd's has filed litigation in Britain denying it is responsible to pay Aon's claim and is asking the court to formally declare it has no liability. Aon has filed a breach-of-contract lawsuit and wants the case handled by U.S. District Court for the Southern District of New York. However, it said Monday that a recent federal court ruling in an unrelated case, which it did not identify, "has raised the possibility that Aon's suit may not be heard in that court." The Chicago-based company fears its chances of winning the case may be lower if it is handled in Britain. Patrick Ryan, Aon's chairman and CEO, said that taking a charge to account for the possible loss "will in no way affect our vigorous pursuit of our claim" with Lloyd's. Despite the charge, Aon reported first-quarter net income of $104 million, or 37 cents a share, up from $19 million, or 7 cents a share, a year earlier. The pretax charge decreased earnings by 20 cents a share. After falling 70 cents Monday following initial disclosure of the charge, Aon shares rose 43 cents to $35.80 Tuesday afternoon on the New York Stock Exchange.

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