John M. Walker, Jr., Chief Judge of the U.S. Court of Appeals for the Second Circuit, has issued a ruling denying Silverstein Properties’ motion for summary judgment in its battle with Swiss Re, Travelers and other insurers over the amount to be paid for the destruction of the World Trade Center.
The latest battle in the war over whether the loss of the twin towers constituted one event – Swiss Re’s position – or two separate events – Silverstein’s position – was decidedly won by the one event forces.
Silverstein’s motion for summary judgment had asked the court to find as a matter of law that the Sept. 11 attacks constituted two events, and thus permitted two recoveries. Trial Judge John Martin had originally rejected this contention, and an appeal followed. The Appellate Court’s decision opens the way for a jury trial on the issue, which could be held early next year.
The legal issues, while complex, have seemingly come down to which of two forms the parties intended to use as a binder when they agreed to cover parts of the WTC risk. Swiss Re has always maintained that all parties made reference to a form prepared by Willis, the WilProp Form, which makes reference to an “occurrence or series of occurrences,” and would seem to rule out the “two event” theory. Silverstein’s position holds that a form prepared by Travelers was used, which does not have this restrictive language.
WilProp would seem to have gotten a substantial endorsement from the Court. In a press release issued following the decision Swiss Re cited the following portions of the opinion:
“[I]t was in Silverstein Properties’ interest to incorporate into their insurance coverage a definition of ‘occurrence’ that would apply in the event of a loss or series of losses. This goal was accomplished by the WilProp form’s inclusive definition of ‘occurrence.’ When Travelers held out for using its own form in its negotiations with Willis in August 2001, Timothy Boyd, a vice president of Willis, reported that fact to a co-broker, stating, ‘Although other players have signed binders based on WilProp, Travelers is insisting we use their form and this is under review.’ Apart from its potential as a party admission, the statement that ‘players [other than Travelers] have signed binders based on WilProp,’ made by the Silverstein Parties’ agent on August 3, 2001 – after the binders were in place and before the WTC was destroyed – is consistent with our review of the binder negotiations….”
In another portion of the opinion Swiss Re quotes the Court as stating: “Despite the Silverstein Parties’ arguments to the contrary . . . we conclude that the September 14 Travelers policy, issued three days after the loss at issue here, has no bearing . . . .”
Calling Silverstein’s arguments “a desperate effort to double his recovery,” Swiss Re was obviously pleased by the decision. Jacques Dubois, Chairman of Swiss Re America Holding Corp. commented, “Swiss Re is ecstatic about the decision. Every Court that has considered Silverstein’s argument to recover beyond his stated insurance policy limit has rejected it outright. We are confident that a jury will do the same.” While Swiss Re’s attorney, Barry Ostrager of Simpson Thacher & Bartlett LLP, stated, “Today’s decision confirms our entire theory of the case. Silverstein purchased $3.5 billion worth of insurance coverage based on the WilProp policy form – the form that he and his broker wanted. His recovery is capped at $3.5 billion.”
The decision also found in favor of Royal & Sun Alliance, The Hartford and The St. Paul concerning their claims to have been bound under the terms of the WilProp form. Swiss Re’s bulletin duly noted that “it has now been conclusively determined that at least five insurers (approximately a quarter of those participating on the WTC program) were bound on the WilProp form and are liable for only one policy limit. Despite Silverstein’s best efforts to spin it otherwise, the Second Circuit’s decision signals loudly that Silverstein’s bid to double his insurance recovery is failing fast. The decision confirms what Swiss Re has said all along: the World Trade Center insurers were bound on the WilProp policy and the total destruction of the WTC by terrorists on September 11 was a single occurrence.”
While that’s still up to a jury to decide at the upcoming trial, as Silverstein’s lawyer Howard Rubenstein pointed out, the Appellate Court’s decision substantially boosts Swiss Re’s chances of prevailing. However, Appellate decisions are not evidence, and ultimately it will be up to a panel of New Yorkers to determine who will prevail, based on a preponderance of the evidence presented.
Their decision will also decide how much the remaining insurers will be required to pay to help rebuild the World Trade Center. As there are still several billion dollars involved the trial should be quite a lively event.
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