New York Governor Eliot Spitzer and Insurance Superintendent Eric R. Dinallo announced that they have negotiated a $2 billion settlement between Silverstein Properties and seven insurance companies covering all outstanding insurance claims arising from the Sept. 11 terrorist attack on the World Trade Center.
They said the agreement is the largest in regulatory history and ends almost six years of legal battling and removes the last major obstacle to development at Ground Zero.
With these insurance claims resolved, Silverstein Properties and the Port Authority can now proceed to obtain the financing needed to rebuild Ground Zero.
Silverstein Properties, Inc. leased the World Trade Center from the Port Authority in July 2001. When the planes destroyed the twin towers on September 11, insurance policies for the Trade Center had not been finalized. Suits were filed in October 2001 to resolve disputes over how much the insurance companies owed.
The courts eventually determined that the most Silverstein Properties could collect was $4.68 billion. Until now, the insurance companies have paid about half of that total, leaving the remaining sum in dispute.
Beginning in late March, Dinallo held dozens of meetings with Silverstein Properties and the insurance companies. This month, when several outstanding issues remained unresolved, Spitzer became personally engaged in the negotiations, according to the administration.
The insurance companies involved in the settlement are Travelers Companies, Inc., Zurich American Insurance Co., Swiss Reinsurance Co., Employers Insurance Company of Wausau, Allianz Global Risks US Insurance Co., Industrial Risk Insurers (now owned by Swiss Reinsurance Co.) and Royal Indemnity Co.
As part of the agreement, Silverstein Properties and the insurance companies have signed confidentiality agreements requiring that specific amounts paid by each company will not be disclosed. The total for all seven companies is $2 billion. These agreements settle all outstanding court cases and related proceedings.
In September 2006, Silverstein Properties and the Port Authority achieved a global agreement for comprehensively rebuilding the World Trade Center site. The agreement called for the Port Authority to construct Towers 1 and 5, for Silverstein Properties to construct Towers 2, 3 and 4 along the eastern portion of the site, and for the Port Authority to prepare the “East Bathtub” foundation for construction of those towers. In order to help finance this rebuilding, Silverstein Properties and the Port Authority agreed to a split of the remaining insurance proceeds of approximately 56 percent to Silverstein and 44 percent to the Port Authority.
The two sides have spent hundreds of millions of dollars on legal fees and other court-related costs. Spitzer said the agreements will save additional tens of millions in legal costs and allow the Port Authority and Silverstein Properties to focus on rebuilding at Ground Zero.
“It is essential that the rebuilding at the World Trade Center site proceed as quickly as possible,” said Spitzer. “The unsettled insurance claims were the last major barrier to rebuilding and have been bitterly and intensely contested for almost six years.”
Dinallo said the agreement represents “government at its best, working with industry to solve a problem, rather than using the courts or fines or other adversarial procedures.”
He also said the case highlights the essential role that insurance plays in modern society. “If not for the private insurance industry providing a substantial portion of the funding to rebuild from this vicious terrorist attack, the entire cost could have been left to taxpayers, ” Dinallo added.
Delaware Insurance Commissioner Matt Denn was also involved in the settlement. In February, his office approved a management buyout of Royal & Sun Alliance Insurance Group’s U.S. operations, known as Arrowpoint Capital. Denn said he and his staff were involved in the settlement talks and, as principal regulators of Arrowpoint, and signed off on the agreement.
“My first and foremost responsibility is to ensure that Arrowpoint Capital is able to pay all of its policyholders’ claims now and in the future. The agreement announced today furthers that goal. It is a fair resolution of the claims of the World Trade Center and relieves Arrowpoint of substantial uncertainty relating to the litigation of these claims,” Denn said in a statement.
The Insurance Information Institute estimates insurers paid $37.0 billion (adjusted in 2006 dollars) in property, life, and liability claims for losses related to the events of Sept. 11, 2001 in New York, Virginia and Pennsylvania.
Source: New York Governor Eliot Spitzer’s office
Delaware Insurance Department
Insurance Information Institute