As WTC Trial Proceeds, Jurors DemandClarification

As lawyers continue to tackle complex business dealings ladenwith insurance jargon in the trial over World Trade Centercoverage, signs are emerging after only two weeks that fatigue andconfusion may already be setting in among some jurors and that manyof them are just too overwhelmed to follow along with theparticulars of the case at this pace.

Indeed, last week, Michael Mukasey, the presiding judge, toldthe court that he had been informed by the jurors that they weregetting confused. “I should tell you about a request that I gotfrom the jury,” Judge Mukasey informed the lawyers in court afterthe jury had left for the day on Feb. 17. He remarked that jurorshad sent him a note asking to repeat his instructions to them on“what issue you are 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 themi.e., shorten them and make themclearer.”

The judge advised that if the lawyers dont shorten theirarguments, then jurors are simply going to decide this case basedon “who they like the bestand I would be perfectly willing to putinto 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 Court,is 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.Silversteins WTC claim to one event of $3.55 billion, rather than aTravelers property form, which offers no such definition and thuswould be more beneficial to Mr. Silverstein's claimthat 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. Silversteins camp has acknowledged in this trial that manyinsurers received only the Willis property formalso called the“Wilprop” formfor the WTC underwriting submission before theyissued binders prior to Sept. 11, 2001.

However, Mr. Silversteins attorneys contend that when Travelershad insisted on using its own form, which doesnt define occurrence,the Travelers document had become the operative form for thecoverage before the attack.

During the trials first two weeks, attorneys from both sidesexamined and cross-examined some 10 witnessesstarting with Mr.Silversteins risk manager, Robert Strachan (see last weeks editionfor a full report), then moving on to other executives, includingofficials 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. Silversteins broker on the WTCinsurance

The trial is expected to last through March and possibly beyondthat, with scores of new witnesses yet to be grilled, some of theparticipants involved in the case told NationalUnderwriter.

However, based on some of the testimony so far, the jurorssevenmen and five women, most of whom appear to be in their 40s or50sperhaps can be forgiven for becoming bewildered by the technicalissues in dispute. Some witnesses, for example, offered testimonythat sometimes appeared to contradict other witnesses or even theirown earlier remarks.

Take the case of Robert Strachan, Mr. Silversteins risk managerand the trials first witness. He testified during the trials firstweek that he had accepted the Travelers form as “the operativepolicy” back in July 2001.

He explained that faxing the Wilprop form the day after theterrorist attack to an attorney for the WTCs 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 formnot that it was the operative policy. “It was theonly policy I had in my office” at that time, he said.

However, last week, Peter Lefkowitza key witness who served asprincipal manager from the consulting firm Harbor Group to adviseGMAC on WTC insurance mattersoffered testimony that could undermineMr. Strachans claim.

Mr. Lefkowitzone 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, 2001told 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 deductiblewith theimplication that there was only one insured event in the WTCcaseaccording to Mr. Lefkowitzs testimony.

Then, Mr. Lefkowitz noted: “I said to him, Did you ever think ofthe 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. Last week, one major witnessin particular rankled attorneys representing the insurers and eventested Judge Mukaseys 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 last week withthe response: “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 also stepped in, even asking Ms. Herrmann that,when she met with Mr. Silverstein's lawyers, if they had everdirected her about remembering certain information. When she toldthe judge that she was asked to be honest and answer “if the lightbulb goes off,” the judge then remarked if Mr. Silverstein'slawyers would have preferred Ms. Herrmann to have “as few lightbulbs as possible in this case.”

There was also positive testimony for Swiss Res Mr. Ostrager. OnFeb. 18, Timothy Boydan assistant vice president of Willis who hadworked on obtaining the WTC insurance coveragetestified that hetold GMAC representatives on July 9, 2001, that the Wilprop formwas the form that was to be used by Willis to go to themarketplace. He 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.

Reproduced from National Underwriter Property &Casualty/Risk & Benefits Management Edition, February 20, 2004.Copyright 2004 by The National Underwriter Company in the serialpublication. All rights reserved.Copyright in this article as anindependent work may be held by the author.