WTC ATTACKS WERE TWO EVENTS, SAYS JURY:

Larry Silverstein's long and seemingly quixotic battle to collect twice from the same insurance loss has paid off with his first big win, as a jury ruled that the World Trade Center attacks did indeed constitute two occurrences. This may double Silverstein's recovery to $2.2 billion. Silverstein Properties held a master lease on the buildings.

In the first trial, which ended last April, jurors had determined that the attacks, although carried out by two hi-jacked airplanes, constituted a single occurrence within the meaning of a binding form prepared by Willis, the WilProp form. As a result Swiss Re, a number of Lloyd's insurers, Chubb and several other companies were held responsible for one, rather than two, payments. The second trial determined the responsibility of those insurers, who could not prove that they relied on the wording of the WilProp form. The defendants were: Allianz Global Risks, St. Paul /Travelers, Industrial Risk Insurers, Royal & SunAlliance, TIG Insurance, Tokio Marine & Fire, Zurich Financial and Twin City Fire Insurance.

The question of liability ultimately turned on the interpretation of the wording contained in a binding form prepared by Travelers, which did not contain the restrictive definition of an occurrence, as was the case with the WilProp form. The jury therefore found that the insurance binders--no formal written policies had been executed on Sept. 11, 2001--should be interpreted to encompass two separate attacks. The actual amount of loss is also in dispute with a specially appointed arbitration panel engaged in trying to determine the exact amount. Swiss Re has not joined in those proceedings. There is a third trial scheduled to determine the amount of damages, though the matter may be settled out of court before then.

ILL. JUDGE RULES COMP FEE HIKE IMPROPER:

An Illinois Cook County circuit judge has ruled that a state increase in fees paid by employers into the state's workers compensation fund was improper because it was used to help plug a gaping hole in the general revenue fund. The fee hike, one of dozens targeting Illinois businesses passed by the Democratic-controlled state government in an attempt to balance the budget while avoiding income tax increases and government spending cuts, has brought in as much as $30 million. The Illinois Chamber of Commerce has estimated that it only costs $14 million for the state to administer the comp fund with the rest going into the government's coffers. The fee requires insured employers to pay a 1.5 percent premium tax on their workers comp policies; self-insured employers must contribute 0.045 percent of annual wages. The governor's budget office will appeal the ruling, handed down by Circuit Judge Patrick E. McGann.

GREAT AMERICAN, GALLAGHER'S TPA HEAR FROM SPITZER:

Cincinnati-based American Financial Group Inc. announced that its property/ casualty insurance subsidiary, the Great American Insurance Co., has received a subpoena from the New York Attorney General Eliot Spitzer's office requesting information concerning the insurer's business practices in writing legal malpractice insurance. The company said it believes the requests are part of the sweeping probe of industry practices kicked off by Spitzer's lawsuit against Marsh & McLennan Cos. Great American said it intends to cooperate with the Attorney General's investigation and knows of "nothing illegal or improper" in its business practices.

Meanwhile, Itasca, Ill.-based Gallagher Bassett Services Inc., a third-party administrator and a wholly-owned subsidiary of Arthur J. Gallagher & Co., received a subpoena from the office of New York Attorney General Eliot Spitzer requesting information in connection with an investigation it is conducting. The subpoena does not seek information concerning Gallagher's insurance brokerage operations. As of press time, Gallagher has not received a subpoena from Spitzer's office in connection with its insurance brokerage operations, nor has it been named in any proceedings filed by Spitzer. Similar to many other participants in the insurance industry, Gallagher has received subpoenas and requests for information from various other state attorneys general and from state departments of insurance regarding Gallagher's insurance brokerage operations. Gallagher said it is cooperating with all such inquiries.

PCI LAUDS PROPOSED ILL. CLASS ACTION RULE CHANGE:

A proposed rule change governing class action lawsuits would benefit Illinois consumers and businesses will, argued leading insurance lobby Property Casualty Insurers Association of America. Rule 225, however, was unanimously rejected by the Illinois StateBoard Association board earlier this month. The full ISBA assembly was scheduled to vote Dec. 12 on whether to support the proposal. The rule is modeled after a federal civil procedure "best practices" rule that requires plaintiffs to prove that a class action would be superior to any other form of claims resolution. Many Illinois jurisdictions already follow the rule, but as it is not required many--including some so-called judicial hellholes--do not, PCI lobbyist Laura Kotelman said in a statement. The Supreme Court Rules Committee is expected to make a decision sometime in 2005.

S&P SAYS PERSONAL LINES CARRIERS ARE STRONG:

Fundamentals remain strong for U.S. personal lines insurance carriers, according to a report published by the ratings firm Standard & Poor's. This is reflected in S&P's decision to retain a stable outlook on the personal lines sector as well as the improved outlook distribution for personal lines insurers. Credit analyst Polina Chernyak said that while earned premium growth, declining loss frequency, lower unfavorable reserve development and improved profitability are all favorable, increased competition should lead to 2004 being a "cyclical peak." Looking ahead, Chernyak said that perhaps the biggest constraint on creditworthiness in the sector in 2005 could be the possible return to a less-disciplined approach to operating results as earnings from investments increase, providing a surplus to cushion against underwriting losses. The biggest question here is whether or not the major national players, those with the competitive advantage of being able to enter new markets, will stay disciplined now that there is less pressure on them to do so.

INSURERS WELL-POSITIONED TO SHOULDER HURRICANE LOSSES:

Even with the nearly $21 billion of hurricane-related losses expected to be reflected in the third- and fourth-quarter results, the nation's property/casualty insurers are well-capitalized and safely positioned to recover without much difficulty, according to Weiss Ratings Inc. The industry posted impressive performance numbers during the second quarter of 2004, with a $9.2 billion net underwriting gain, representing a 560 percent jump over the $2.0 billion underwriting loss reported for the same period in 2003.