Silverstein Triumphs Against Attempt by Insurers to Avoid Two Occurrence Claim

December 19, 2002

Silverstein Properties Inc. announced that Judge John S. Martin, Jr. has rejected an attempt by three insurers to avoid a jury trial on whether they were liable to pay on a two occurrence basis for the destruction of the Twin Towers.

The three insurers – Federal Insurance, a unit of Chubb; Lexington, a unit of AIG; and Zurich American – argued that their coverage for the Twin Towers was governed by the so-called WilProp form, a form that contains a unique definition of the term “occurrence,” and that under that unique definition, recovery is limited to a single “occurrence.” The three insurers represent approximately 8.5 percent of the entire coverage of the World Trade Center buildings leased by Silverstein affiliates from the Port Authority, committing to a total of $305 million of the $3.55 billion “per occurrence” in coverage.

In his ruling, Judge Martin denied summary judgment motions from the three insurers, and held that they could not avoid a trial on what form governed their coverage. Judge Martin ruled that evidence showed that all three insurers had been told that the WilProp form had been replaced by a form from Travelers Indemnity and that the insurers therefore could not avoid a trial on Silverstein’s claim that the three insurers agreed to follow the Travelers form. The Travelers form does not contain a definition of the term occurrence. Silverstein claims that under New York law, in the absence of a definition of the term, the events of Sept. 11 constitute two occurrences for insurance purposes, and that the insurers are obligated to pay $6.7 billion towards the rebuilding of the World Trade Center site. In a ruling last week, the United States Court of Appeals for the Second Circuit agreed to rule on Silverstein’s “two occurrence” claim, and decide whether the events of Sept. 11 constitute two occurrences as a matter of New York law. The Second Circuit has scheduled a hearing on the appeal for the week of March 25, 2003. At the same time, the Second Circuit will also hear an appeal from a prior ruling by Judge Martin that the coverage provided by three other insurers that provided approximately 3 percent of the coverage for the Twin Towers was governed by the WilProp form.

Howard Rubenstein, a spokesman for Silverstein, noted, “We are extremely gratified by Judge Martin’s ruling. We are also gratified that the Second Circuit has recognized the importance of this case for the future of the rebuilding of lower Manhattan and scheduled argument on our appeals for March. We are very confident in our positions and look forward to the hearing before the Second Circuit.”

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