AERT Junction, Texas Facility Fire Claim Hits Litigation

January 24, 2005

Advanced Environmental Recycling Technologies Inc., a provider in composite building materials technology, announced that the company has been sued by certain underwriters at Lloyd’s, London (“Lloyd’s”) in connection with a pending final settlement of AERT’s Junction, Texas fire claim.

Lloyd’s filed suit Jan. 19, 2005 in the Circuit Court of Washington County, Arkansas seeking a declaratory judgment that they are not liable to reimburse AERT for certain costs of rebuilding the AERT Junction, Texas facility. Lloyd’s alleges that AERT did not rebuild the facility exactly as it had existed prior to the March 2003 fire and that AERT committed fraud in seeking reimbursement for alleged improvements made to the facility.

Lloyd’s also seeks to retroactively cancel its portion of the insurance policy. The filing was reportedly unexpected by AERT because the company has cooperated fully with the claims underwriting process and negotiations toward a final settlement of the claim were progressing.

AERT reportedly believes the Lloyd’s lawsuit is without merit. The company filed a counterclaim on Jan. 24, 2005 denying all of Lloyd’s allegations and seeking immediate and full reimbursement for rebuilding of the Junction plant.

AERT seeks to recover actual damages in the amount of at least $1.8 million plus attorney and court fees and punitive damages for reported acts of bad faith committed by Lloyd’s.

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