Risk Management

Most Insurers Can Treat WTC as One Event

Jury has not yet reached a verdict on Swiss Re, which held the largest single portion of the World Trade Center policy.
Stephen TaubMay 3, 2004

In a landmark decision that could have a widespread effect on insurance companies and the insured, a jury ruled that the two airplane strikes that brought down the World Trade Center on September 11, 2001, amounted to one incident, from an insurance standpoint.

The upshot: There will be $1 billion less to rebuild the complex.

Larry Silverstein, who bought the WTC lease just six weeks before the attacks, had argued that he was owed $7 billion because the attacks were two separate events — double the amount of his $3.5 billion policy, according to Reuters.

The jury concluded that the coverage offered by Lloyd’s of London and seven other insurers — which held about $1.1 billion of Silverstein’s policy — was governed by a form that defined attacks by two hijacked jets as a single insurable loss, explained Bloomberg. Silverstein had said the binding document was a different form, which doesn’t define a loss occurrence and might have entitled him to nearly double the policy’s face amount by counting the attacks as two events, added the wire service.

“What you saw was a very creative attempt to get a double recovery,” said Lloyd’s attorney David Boies, in the Bloomberg article. “One of the lessons learned here is that creative lawyering will get you so far but no further.”

The jury found that three of the insurers — Royal & Sun Alliance Insurance Group Plc, Hartford Financial Services Group’s Twin City Fire Insurance Co., and Zurich Financial Services AG, representing about $176 million of coverage — didn’t offer policies based on the form defining the attacks as one loss, added the wire service.

The jury has not yet reached a verdict on Swiss Re, which held the largest single portion of Silverstein’s World Trade Center policy.

The verdicts could threaten Silverstein’s ability to complete an ambitious $12 billion project for rebuilding on the 16-acre site in lower Manhattan. Silverstein and New York state officials have maintained that they need all $7 billion in insurance proceeds.