Jury Rules WTC Attacks Were Two Events; Silverstein Recovery May Double to $2.2 Billion

December 7, 2004

The second of three scheduled trials to determine the amount of the recovery for the destruction of the World Trade Center's twin towers ended in a victory for master lease holder Silverstein Properties, and its head Larry Silverstein.

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 (with part of the risk reinsured by France's SCOR Group - see article in international section), St. Paul /Travelers (Gulf Insurance), Industrial Risk Insurers (a unit of General Electric), Royal & SunAlliance (Royal Indemnity), TIG Insurance (a unit of Canada's Fairfax Financial), Tokio Marine & Fire 'Millea Group), Zurich Financial (Zurich American) and Twin City Fire Insurance (a unit of The Hartford).

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 original claim of approximately $1.1 billion may therefore be doubled to $2.2 billion. However, there are still a number of additional considerations that could influence the amount of any final payment.

St.Paul Travelers released a brief statement indicating that the impact of the decision, "taking into account the Company's reserve position and reinsurance, will be immaterial to the Company."

Some of the companies, however, who lost yesterday's decision may well choose to appeal the jury's verdict, which could extend the case for several years. Silverstein has already appealed the first verdict.

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. No date has yet been set for it to begin, and most of the parties have more or less indicated that they are willing to settle the matter. However, since they haven't been able to settle much of anything since the case began in October 2001, it seems somewhat unlikely that they can do so now.

Silverstein was nonetheless highly pleased by this latest result. In a statement released by his lawyer, he commented: "I am thrilled with today's victory. But this is a win for all New Yorkers. Today's decision means an additional billion dollars of insurance proceeds will be available, which, together with Liberty Bonds, will ensure a timely and complete rebuild of the World Trade Center. I strongly felt, and the jury agreed, that the destruction of the Twin Towers by two separate airplanes at two separate times was two separate occurrences and that these insurers have an obligation to pay their fair share to help make Lower Manhattan whole again."

Neither New Yorkers, nor any other Americans could argue with that, but the arguments over who is ultimately going to pay for it are likely to continue.