WTC Claims Dispute Gets Nasty (ier)

The legal dispute between Swiss Re and Silverstein Properties, over whether the destruction of the twin towers of the World Trade Center constituted one occurrence or two, has spilled over to involve the Willis group, the lead broker in placing the coverage.

In preparation for trial, the parties have been conducting extensive discovery proceedings. Swiss Re, dissatisfied with certain deposition testimony, issued a press release detailing the contents of its motion, filed on May 3, “to break the purported Silverstein/Willis ‘Joint Interest’ privilege asserted by Wachtell, Lipton” [attorneys for Silverstein].

“In so doing, Swiss Re is asking the Court to require production of highly relevant facts surrounding Silverstein’s post-loss reinvention of the WTC insurance coverage placement history,” the bulletin continued. As no definitive insurance policies had been prepared or executed before the Sept. 11 attacks destroyed both towers, the wording of the binding forms and the terms they make reference to are of critical importance.

Swiss Re has essentially charged Silverstein, and indirectly Willis, with trying to alter the evidence in the case by asserting that the binders the parties executed referenced the Traveler’s form which can be interpreted to define an “occurrence” as being more than one event. Swiss Re contends that the parties had signed binders that referenced another form—the WilProp form – which refers to all losses from a single occurrence or series of occurrences as being one loss, i.e. one single event.

Swiss Re’s attorney Barry Ostrager explained that “binders are predicated on underwriting; they’re a shorthand for the [eventual] policy.” They contain only the bare essentials—property description, policy limits, premium rate etc., and don’t actually indicate exactly which form will be used to draft more complete policy provisions, which are more or less agreed to by referencing the policy form.

In this case stated Ostrager, “No one questioned that the WilProp form was the one referenced in the binders until a week or so after the event.” He added that, “On September 12th the risk manager [of Silverstein Properties] sent a copy of the WilProp form to the Port Authority [the owner of the WTC],” and he confirmed that the WilProp form has specific language defining a loss event as an occurrence or a series of occurrences, but, said Ostrager, “the Travelers form doesn’t define the term.”

Jacques Dubois, chairman of Swiss Re America Holding Corp, stated in the press release that, “It is now obvious that Silverstein’s Travelers form two-occurrence confection is nothing but a post-loss creation by Silverstein and his counsel and bears no relation to the actual placement history.” The company added, “it is crystal clear that virtually all of the insurers bound coverage on the Wilprop form and no fully negotiated Travelers form existed prior to September 11 and, in fact, neither Willis nor Silverstein wanted the Travelers form.”

Swiss Re asserted that, “Willis executives and Silverstein’s own senior insurance risk manager, established in deposition testimony and in written material that, on September 12, after much discussion among these insurance professionals, they determined that the Wilprop form was the controlling policy form and that the tragedy constituted one occurrence. Upon the arrival of Silverstein’s counsel days later, however, Silverstein’s revisionist history campaign began. Swiss Re now asks the Court to stop Silverstein’s improper obstruction of the discovery process and allow the to out.”

Silverstein and Willis vigorously denied the allegations, calling them absolutely untrue, and promising to oppose the motion, which puts the world’s third largest insurance broker squarely in the middle of the dispute, even though it is not a party to the lawsuit; at least not yet.

Charges of perjury, tampering with the evidence and obstructing the legal process—all potentially criminal offenses—are extremely serious, and have served to raise the level of the conflict even higher than it already was.

The controversy has become centered on the actions of Willis broker Timothy Boyd. According to Swiss Re, Boyd originally indicated that the WilProp form was referenced when the coverage was bound. Its motion charges that Boyd was pressured to change his opinion when he gave deposition testimony that indicated that the Travelers form was referenced. Silverstein’s lawyers countered that Willis’ own attorneys had assured them that the Travelers form was always the one to be applied to the WTC coverage.

Willis has so far issued no further statement concerning the dispute.

Two weeks later Silverstein’s attorney filed a motion for summary judgment in the Manhattan U.S. District Court of Judge John S. Martin, who’s overseeing the discovery proceedings. It asserts that their view, that two incidents occurred, is sufficiently established by the evidence presented in the discovery proceedings to warrant granting summary judgment for Silverstein Properties—that it is entitled to recover $7.2 billion for the loss of both towers.

At a subsequent hearing Judge Martin also heard arguments from the other side, ironically led by attorney Harvey Kurzweil, representing Travelers Indemnity. He urged the court to find that there was only one occurrence, not two, arguing that, had the 1993 attack on the WTC succeeded, it would have been one occurrence, and the fact that this time terrorists used two airplanes to accomplish the same task did not alter the fact that only one attack occurred. According to Dow Jones Newswire, Kurzweil told the court that “Insurance coverage should not depend on precise tools that terrorists use.”

Silverstein’s lawyer, Herbert Wachtell, however, asserted that the attack by the second plane had caused far greater damage than would have been the case if only one attack had occurred, making it obvious that there had been two events.

Judge Martin made no ruling on the Silverstein motion for summary judgment, and likewise postponed his ruling on Swiss Re’s motion to sever any connection between Willis and Silverstein. He indicated he would consider the request of several insurers to extend the discovery phase of the case, which is now set for trial in September. Ostrager indicated that it was unlikely that the court would make any substantive decisions at the hearing, but would concentrate on procedural matters relating to the timing of discovery.

Editor’s note: Judge Martin denied Silverstein’s request that the attack be ruled more than one event on June 3. The trial is expected to take place in September.

Topics Claims Swiss Re