The largest school-bus company in New York City is warning that it could go belly-up because a subsidiary of the insurance giant AIG has allegedly bilked it out of Hurricane Sandy coverage.
The setback to Atlantic Express Transportation Corp., which suffered significant seawater and fire damage to its yellow-bus fleet and facilities on Staten Island during October’s superstorm, comes amid a growing threat of an unrelated strike by school-bus workers.
In court papers filed last week, Atlantic said Boston-based Lexington Insurance had shorted the company by at least $30 million in expected reimbursements.
Atlantic estimates its property and vehicle damages, for both coach and yellow buses, at more than $55 million.
The company claims its insurance policy was quietly altered under a routine renewal in February 2012, which lowered the upper limit on coverage for flood damage from $35 million to just $5 million.
The busing behemoth, which transports 40,000 school kids daily, says neither Lexington nor insurance broker Marsh USA — which is also named in the lawsuit — notified the company about the change in terms.
In fact, Atlantic Express claims it didn’t even receive a copy of the altered policy until November, after the hurricane.
“The failure of Lexington to provide the insurance coverage Atlantic is entitled to under the renewal policy has delayed and impaired Atlantic’s recovery from the devastation of Hurricane Sandy, and jeopardized the future of Atlantic and its transportation services,” read court papers that were filed last week in Staten Island Supreme Court.
Both Lexington Insurance, through AIG, and Marsh USA declined comment.
A lawyer for Atlantic Express didn’t return a phone message seeking comment.
Court papers show the company is seeking not only the $30 million it believes it’s owed, but also $90 million in punitive damages for lost routes and the cost of renting additional vehicles since the storm.
Atlantic has been renting “temporary replacement vehicles at above-market rental rates” while it awaits reimbursement from Lexington, the documents say.
It has also had to “relinquish a substantial number of its transportation contract routes at a substantial loss.”
The battle comes amid AIG’s public campaign to thank the American taxpayers for their nearly $200 billion bailout of the once-teetering firm — and to tout how it helped pay the country back.
“We’re helping the East Coast recover from Hurricane Sandy,” says one employee in the video campaign.
“Helping people recover and rebuild — that’s what we do,” says another.
AIG’s former CEO has initiated court action against the US government regarding the bailout — charging that its terms had been detrimentally onerous to shareholders.
Meanwhile, city education officials said they’re continuing to take seriously the threat of a strike by yellow-bus workers over the loss of job protections.
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