Trade Center Jury Tells Judge: ?We're Confused'

By Michael Ha

NU Online News Service, Feb. 19, 2:59 p.m.EST?The jury hearing evidence in the World Trade Centerinsurance claims dispute is baffled by the involved technicaltestimony they are hearing, they told the judge.[@@]

Trial Judge Michael Mukasey announced during the proceedings inManhattan Federal Court this week that he had been informed by thejurors that they were getting confused.

"I should tell you about a request that I got from the jury,"Judge Mukasey informed the lawyers for the two sides Tuesday afterthe jury had left for the day. He said the jurors had sent him anote asking to repeat his instructions to them on "what issue youare trying here."

"We got a note from the jury, ?What is this case about?'" JudgeMukasey commented, which drew laughter in the courtroom. "Thatshould tell you something about what is happening here. It shouldalso tell you something about how you are making your presentationsand what you should do to them?i.e., shorten them and make themclearer."

The judge advised that if the lawyers don't tighten up theirpresentations, then jurors are simply going to decide this casebased on "who they like the best?and I would be perfectly willingto put into a sealed envelope my views on how that is going to comeout."

The key issue in the trial pitting WTC leaseholder LarrySilverstein against 13 of his insurers in Manhattan Federal Courtis which insurance form may have been used by the carriers in theircoverage binders.

Insurers are arguing that they are bound to the Willis propertyform, which specifically defines "occurrence" and would limit Mr.Silverstein's WTC claim to one event of $3.55 billion, rather thana Travelers property form, which offers no such definition and thuswould be more beneficial to Mr. Silverstein's claim?that twoseparate airplanes crashing into two separate WTC towers constitutetwo occurrences for insurance purposes.

Final policy documents were not signed before the Sept. 11terrorist attack.

Mr. Silverstein's camp has acknowledged in this trial that manyinsurers received only the Willis property form?also called the"Wilprop" form?for the WTC underwriting submission before theyissued binders prior to Sept. 11, 2001.

However, Mr. Silverstein's attorneys contend that when Travelershad insisted on using its own form, which doesn't defineoccurrence, the Travelers document had become the operative formfor the coverage before the attack.

During the trial so far, attorneys from both sides examined andcross-examined some 10 witnesses?starting with Mr. Silverstein'srisk manager, Robert Strachan, then moving on to other executives,including officials from:

? WTC retail-space leaseholder Westfield America

? GMAC, which lent $563 million to Mr. Silverstein for his WTClease

? Insurance consulting firm Harbor Group, which had advised GMACon WTC matters

? Willis of New York, Mr. Silverstein's broker on the WTCinsurance

The trial is expected to last through March and possibly beyondthat, with scores of additional witnesses due to be called, some ofthe participants involved in the case told NationalUnderwriter.

However, based on some of the testimony so far, the jurors?sevenmen and five women, most of whom appear to be in their 40s or50s?perhaps can be forgiven for becoming bewildered by thetechnical issues in dispute. Some witnesses, for example, offeredtestimony that sometimes appeared to contradict other witnesses oreven their own earlier remarks.

For example, Robert Strachan, Mr. Silverstein's risk manager andthe trial's first witness, testified during the trial's first weekthat he had accepted the Travelers form as "the operative policy"back in July 2001.

He also explained that faxing the Wilprop form the day after theterrorist attack to an attorney for the WTC's owner, the PortAuthority of New York and New Jersey, as well as to arepresentative for GMAC, was his way of saying "we were workingwith" this form?not that it was the operative policy. "It was theonly policy I had in my office" at that time, he said.

Peter Lefkowitz?a key witness who served as principal managerfrom the consulting firm Harbor Group to advise GMAC on WTCinsurance matters?offered testimony this week that could undermineMr. Strachan's claim.

Mr. Lefkowitz?one of the insurance representatives for GMAC whoreceived the Wilprop form faxed from Mr. Strachan and who hadspoken to Mr. Strachan on the phone on Sept. 12, 2001?told jurorsthat he was the first person to suggest to Mr. Strachan that theterrorist attack might constitute two insured events.

Mr. Strachan also told Mr. Lefkowitz on the phone on Sept. 12,2001, that he thought there was only one deductible?with theimplication that there was only one insured event in the WTCcase?according to Mr. Lefkowitz's testimony.

Then, Mr. Lefkowitz noted: "I said to him, ?Did you ever thinkof the implications if it was two occurrences?'"

"It was just, I think, a spontaneous reaction," Mr. Lefkowitzsaid on the witness stand, adding that when he asked Mr. Strachanon the phone, the day after the attack, if he had thought ofpossible implications if there were two insured occurrences, Mr.Strachan had told him, "No, I never thought of that."

Mr. Lefkowitz also said GMAC didn't have enough information toback up contentions that the Wilprop form had been replaced as thegoverning policy document prior to the attack, adding that it washis understanding that no policy form had been "finalized." As aresult, he noted, GMAC didn't take a position in the WTC insurancedebate. "I don't believe they were taking sides," he said.

During the past two weeks, there was other conflicting testimonyand also what some attorneys testily described as "selectiveamnesia" from some of the witnesses. This week, one major witnessin particular rankled attorneys representing the insurers and eventested Judge Mukasey's tolerance.

The witness, Beth Ann Herrmann, was director of insuranceoperations at GMAC at the time of the Sept. 11 attack. On that day,she was asked by GMAC's chairman to collect as much information aspossible about the WTC coverage. She promptly began to attendmeetings, take part in conference calls and listen to conversationsinvolving managers from the Silverstein Properties and Willis, aswell as people from Harbor Group and GMAC, over the followingseveral days.

But despite taking extensive notes during that time, Ms.Herrmann answered most questions during the trial with theresponse: "I don't have an independent recollection" from thosemeetings. "I remember walking into the room, but I don't rememberany of the conversation," she said of one of the meetings she hadattended.

Barry Ostrager, the lead attorney for Swiss Reinsurance Company,the largest player in the case, became irritated enough during hisexamination to ask Ms. Herrmann: "So your mind is a completeblank?" to which she replied: "As to words and content, yes."

Judge Mukasey added his own questions, asking Ms. Herrmann if,when she met with Mr. Silverstein's lawyers, they had ever directedher about remembering certain information.

When she told the judge that she was asked to be honest andanswer "if the light bulb goes off," the judge then remarked if Mr.Silverstein's lawyers would have preferred Ms. Herrmann to have "asfew light bulbs as possible in this case."

Timothy Boyd, an assistant vice president of Willis who hadworked on obtaining the WTC insurance coverage, proved to be apositive witness for Swiss Re. He testified Wednesday that he toldGMAC representatives on July 9, 2001, that the Wilprop form was theform that was to be used by Willis to go to the marketplace.

Mr. Boyd said his colleagues at Willis had told him that theTravelers Property form was "no good" and "a pain in the neck"compared to the Wilprop form they were sending out to insurers.