Verdict in 9/11 insurance battle

WTC leaseholder is depending on the payout to rebuild

Phil Hirschkorn and Jonathan Wald

CNN





NEW YORK (CNN) -- A jury handed some bad news Thursday to the man leasing the World Trade Center site with a verdict that denied him double insurance payments.

Larry Silverstein signed the lease just six weeks before the WTC's twin towers were brought to the ground by terrorists in the September 11, 2001, attacks.

Silverstein contended that the two jetliners crashing into the twin towers about 15 minutes apart should be considered two separate events, which would allow him to collect the maximum from the insurers for each tower, as much as $7 billion.

The insurance companies insisted that the attacks should be considered a single event, cutting in half the amount Silverstein can collect.

After a three-month trial, jurors decided Thursday that the attacks should be considered a single event for nine insurance companies, which together are responsible for at least $1 billion in coverage.

But the 11-person jury could not reach a verdict on Silverstein's dispute with Swiss Reinsurance Co. -- the largest of the World Trade Center's insurers, responsible for 25 percent of its coverage.

U.S. District Judge Michael Mukasey accepted the partial verdict but told the jury to continue deliberating on the dispute involving Swiss Reinsurance, known as Swiss Re.

Silverstein, 72, leased the World Trade Center from its owner, the Port Authority of New York and New Jersey, in July 2001. The 99-year lease requires him to rebuild and he is depending on the insurance payout to do that.

The government agency overseeing the project, the Lower Manhattan Development Corp., has also factored the payout into its plans.

'Series of similar causes'

Silverstein has been chosen to develop Freedom Tower, a 2 million-square-foot, 1,776-foot-tall skyscraper, and plans as many as four other office buildings on the site. He is already building a 52-story office tower where World Trade Center 7 stood until it collapsed in the wake of the attacks.

After leasing the complex, Silverstein negotiated with 24 insurance companies for a maximum coverage of $3.55 billion per catastrophic occurrence. However, the agreements had not been finalized before 9/11.

The trial's central issue was whether a document drafted by Silverstein's insurance broker in June 2001 was in effect at the time of the attacks.

That form classified damages as a single occurrence if they were attributable to "one cause or a series of similar causes."

Silverstein contended that document had been supplanted by a second form which did not include a definition of "occurrence," opening the door for collecting separately for each tower. But attorney for Swiss Re, Barry Ostrager, called that a "fanciful claim."

The jury ruled that nine of Silverstein's insurers were bound by the first document, relieving them from double damages, but that three others were not.

A second trial will be held to decide if the insurance policies of those three companies, along with six other insurers not involved in the trial, allow Silverstein to collect the maximum payout once or twice.

An appeals court found last year that three other insurers were not bound by the June 2001 document and owed Silverstein $112 million, the amount payable for a single occurrence. Two other companies settled with Silverstein for $400 million.

Ken Erickson, a lawyer for Lloyds Syndicate, one of the nine firms who won in court Thursday, said he was "gratified with the verdict."

"It was a very diligent and very attentive jury over a long trial. We tried to present a straightforward story to them, which we think was the necessary basis on which they resolved this case," he said.

Howard Rubeinstein, a spokesman for Silverstein, declined to comment on the case until the jury finishes its deliberations on Swiss Re.

The nine firms relieved of double damages by the jury Thursday were Lloyds Syndicate, Wurtembergische, Federal Insurance, Employers Insurance of Wausau, Great Lakes Reinsurance, QBE International Insurance Ltd., Lexington Insurance Company, Copenhagen Reinsurance and Houston Casualty.