Jury: No double payout for WTC leaseholder
Insurance company liable for only one $3.5 billion payout
From Phil Hirschkorn and Jonathan Wald
CNN New York Bureau
NEW YORK (CNN) -- A federal jury delivered a decisive setback Monday to World Trade Center leaseholder Larry Silverstein in his dispute with his largest insurer for the twin towers toppled in the attacks of September 11, 2001.
The jury decided Swiss Reinsurance Co., or Swiss Re, responsible for 25 percent of the trade center's coverage, is bound by an insurance form that would define the destruction as a single occurrence -- even though the towers were hit by two hijacked airliners 15 minutes apart.
Silverstein has contended the coordinated crashes should be considered two events, which would have allowed him to collect the maximum catastrophic insurance of $3.5 billion twice -- for a total of $7 billion.
The developer wants to use the money to rebuild up to 10 million square feet of commercial space -- equal to how much was lost in the attacks.
The Swiss Re verdict and the partial decision last week concerning 12 other insurers leaves Silverstein well short of the $7 to $9 billion he estimated it would cost to rebuild the World Trade Center site. If he wins every remaining legal dispute, the most Silverstein can collect from insurance payouts is $4.7 billion.
"We're delighted with the outcome from the jury today. We're gratified that we concluded just as we felt all along," Swiss Re CEO Jack Dubois said.
"In July of 2001, Mr. Silverstein and the insured parties insured the World Trade Center as if it were a single house. And they insured it on a loss limit basis knowing if the property were destroyed, the most they could collect was $3.5 billion. That was the deal," Dubois said.
"It was only after 9/11 they recognized they had underinsured, and for the last two-and-a-half years they have been trying to change the deal, and that's wrong."
Last week, the same jury ruled that eight other firms that provided Silverstein with an additional $1 billion in insurance were also liable for only one occurrence coverage. (Full story)
The jury found that only three firms sued by Silverstein, responsible for less than $200 million, could be liable for two occurrences.
"Of course, I am disappointed that the jury did not see things our way with respect to most of the insurers in the WTC coverage," Silverstein said in a statement. "But let me be clear. A defeat in the courtroom is not a defeat for rebuilding."
The government agency overseeing rebuilding at the trade center site, the Lower Manhattan Development Corp., has chosen Silverstein to develop Freedom Tower, a 2 million-square-foot, 1,776-foot-tall skyscraper that would be the world's tallest when completed in 2009.
Silverstein has already built 20 floors of a 52-story office tower where World Trade Center Building 7 stood until it collapsed September 11. He plans four other buildings at the site.
Monday's verdict found that Swiss Re was bound by a form created in June 2001 by Silverstein's insurance broker, Willis Group Holdings, and known as the "WilProp" form.
The form defined a single occurrence as "all losses or damages that are attributable directly or indirectly to one cause or a series of similar causes ... irrespective of the period of time or area which such losses occur."
Silverstein argued that the WilProp form was supplanted by a form designed in July 2001 by Traveler's Insurance, which did not include a definition of "occurrence."
Another trial will pit Silverstein against 10 more insurers responsible for more than $1 billion worth of "per occurrence" coverage.
"We feel the evidence is strongly in our favor and look forward to our next day in court. And we're looking forward to the day when this litigation ends so we can focus all of our attention on rebuilding," Silverstein said.