Post-Superstorm Sandy Insurance Dispute Leads to Demise of Pictorial Offset, 113 Jobs
CARLSTADT, NJ—Unable to pay back a $2.9 million line of credit and locked in a legal tussle with its insurance company over a $37 million claim, Pictorial Offset announced that it is closing its doors after 78 years. The closure, which is expected to take place in the next two weeks, will result in the loss of 113 jobs.
Don Samuels, one of three managing partners (along with brothers Gary and Lester), said that the company needed the proceeds from the insurance claim to pay back the line of credit to Bank of America (BoA), which was used to get the print shop operational following Superstorm Sandy. The storm dumped more than a foot of water into Pictorial's building.
The insurer, Zurich American Insurance, paid $1 million under the flood insurance clause and another $250,000 for debris removal, but refused to pay for damage to Pictorial's presses, which it deemed a result of flood damage. Pictorial's ownership contends the press damage was a result of 66 major electrical surges and sags—electrical overstressing—prior to the power going out completely. The flooding began an hour after the power outage.
Pictorial Offset filed suit against Zurich last August.
When it became clear that Zurich would not pay for the press damage, the Samuels brothers explored mergers with seven other companies. They had negotiated a letter of intent for an asset purchase agreement, which fell apart at the eleventh hour when the buyer tried to slash sales staff wages in half.
As rumors of a possible closure spread through printing circles, the company found less work coming in from skittish customers who were afraid their jobs wouldn't get finished. BoA turned up the heat on the Samuels brothers last Dec. 23 when it filed suit against Pictorial, prompting the decision to close.
"Gary, Lester and I made sure to finish the customers' work in progress," Don Samuels said. "We've been struggling to find our employees jobs. We closed the business after 78 years with dignity.
"What really killed us was the drone in the marketplace," he added. "Clients became afraid to give us work, which crashed sales. It was a vicious cycle, and it was the real nail in the coffin."
Samuels added that the company's receivables alone would be enough to pay about 90 percent of the bank debt. The company is current on its equipment loans, and Samuels wasn't sure as to how its final disposition would be handled.
What frustrated Samuels was seeing Zurich American utilize, as he described it, "delay, deny and defend" tactics to avoid making Pictorial Offset whole, thus setting the wheels in motion for more than 100 people to lose their livelihoods and cause a family's business heritage to perish.
The company may be gone, but Samuels said the lawsuit will continue.
"The insurance company is reprehensible, and their tactics are clearly by design," he said.