(CN) – A New Jersey appeals court rejected auditor Arthur Andersen LLP’s bid to recover the $200 million it says it lost because of the Sept. 11 terrorist attacks.
The Chicago-based auditor sought coverage under a commercial property insurance policy with Federal Insurance Co., arguing that the damage caused to the World Trade Center and Pentagon reduced its earnings after the attacks.
But the insurer denied Arthur Andersen coverage on the basis that it had no “insurable interest” in either property.
The New Jersey Appellate Division agreed, affirming the lower court’s ruling for the insurer.
“Andersen has neither identified any interruption of its business nor any customer who was unable to receive services as a result of property damage to the World Trade Center or Pentagon,” Judge Marianne Espinosa wrote for the three-judge panel.
Arthur Andersen, which did not own or lease property at either site, based its claims on decreased revenues for a three and a half month period following the attacks.
But Espinosa said the firm’s framing of the argument in terms of a “generalized revenue shortfall” was “a rather transparent attempt to skirt criteria for coverage that it cannot satisfy.”
“Andersen did not derive any direct pecuniary benefit, such as rental income, from the existence of the World Trade Center and Pentagon and suffered no direct loss from the damage inflicted to those buildings on September 11,” the judge added.
Allowing the firm to “reap a windfall recovery for a loss so clearly unanticipated in the calculation of the premium … would undermine the very purpose of an ‘insurable interest’ requirement, reducing an insurance contract to a ‘pure gamble,'” the court concluded.
Witnesses for Andersen conceded that a variety of factors contributed to its reduced revenues, including its part in the Enron scandal.
Formerly one of the largest auditing firms in the United States, Arthur Andersen gave up its CPA licenses after it was convicted of improper accounting of Enron’s books.
That ruling that was later overturned by the U.S. Supreme Court.