Federal appeals court upholds juries’ rulings in World Trade Center twin tower claims

November 6, 2006

A federal court has upheld the jury verdicts that recognized the two-plane terrorist attacks on the towers at the World Trade Center on Sept. 11, 2001, as a single event for some insurers and two events for others.

A three-judge panel of the U.S. Court of Appeals for the Second Circuit in New York found no fault with letting jurors decide the meaning of “event” for insurance purposes.

As a result, the court let stand an April verdict that held the attacks to be one event under the insurance binder used by major insurers. Under that verdict, WTC developer Larry Silverstein and his Silverstein Properties became entitled to about $4.6 billion.

The decision also affirmed a separate jury verdict for nine other insurers that found the event was two claims under a different binder they used while negotiating final coverage terms.

The case is SR International Business Insurance Co. Ltd. versus World Trade Center Properties LLC, et al.

The decision came in an appeal of two separate trials over the World Trade Center and its insurance coverage. Silverstein had argued he was entitled as a matter of law to have the events treated as two claims and that the issue should not have been turned over to jurors.

The Second Circuit took issue with Silverstein’s contention that the divergent judgments entered in the cases were the product of error. “These forms were designed with different interests in mind and, not surprisingly, yielded different results. In our opinion, the jury’s determination that the insurers provided different coverage is not a manifestation of judicial error,” the court wrote.

The court said the separate verdicts reflected “the fact that the parties were at various stages of negotiating coverage when the two hijacked airplanes destroyed the WTC.”

Jurors in the first trial, which ended last April, found that the two-plane attacks constituted a single “occurrence” as set forth in a binding form known as the WilProp. The verdict meant Swiss Re, several Lloyd’s insurers, Chubb and other companies were held responsible for one, not two, claims.

Jurors in the second trial involved other insurers that did not use the WilProp form but instead relied upon one issued by Travelers. The jury found that those insurers had not yet issued final policies and interpreted the Travelers’ insurance binder to allow for two separate attacks.

The defendants in the second trial were: Allianz Global Risks, 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).

Insurer Swiss Re said the federal appeals court decision means that its payment obligation is subject to the terms and conditions of the operative Willis policy and cannot exceed Swiss Re’s 25 percent share of the $3.5 billion loss limit Silverstein had purchased.

“The Second Circuit affirmed a unanimous jury verdict finding that the destruction of the WTC on Sept. 11, 2001, was a single occurrence under the terms of Swiss Re’s coverage. Silverstein’s two-occurrence claim against Swiss Re gave rise to five years of protracted litigation,” said Jacques Dubois, CEO, Swiss Re America Holding Corp. “Today’s decision resolves Silverstein’s two-occurrence claim once-and-for-all in Swiss Re’s favor. As it has since the days following 9/11, Swiss Re will continue to honor its contractual obligations under the terms of coverage it agreed to provide before 9/11.”

The St. Paul Travelers Companies Inc. said the decision would not result in an earnings charge, as the impact of the lower court’s decision had already been recognized in the company’s financial statements.

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Insurance Journal West November 6, 2006
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