WTC Broker Testimony May Bolster InsurersCause

The Willis broker accountable for buying World Trade Centerpolicies for leaseholder Larry Silverstein might have helped thecause of carriers in the WTC insurance trial last week, when heacknowledged there isnt even “a single piece of paper”demonstrating that the form governing the coverage had beenswitched before the Sept. 11 terrorist attack from the one cited byinsurers as limiting the claim to a single event with a $3.5billion limit.

Separately, the spotlight briefly returned to Robert Strachan,Mr. Silversteins risk manager and the trials first witness, whenquestions were raised about whether he might have misspoken or liedabout his contact with lawyers prior to his recall appearance lastweek.

The brokers remarkpart of testimony from Timothy Boyd, anassistant vice president at Willis of New Yorkmight help insurerspoke holes in Mr. Boyds claim that he had decided by mid-July 2001to switch from the Willis Property form (also known as the“Wilprop” form) to the one offered by Travelers Property CasualtyCorp.

Mr. Boyd made his comment on Feb. 23his fourth-straight day oftestimonyunder redirect examination from Barry Ostrager, the leadattorney for Swiss Reinsurance Company, the largest player involvedin this case.

In earlier statements, Mr. Boyd had said that even though theWilprop form was sent out to the marketplace to find carriers forthe WTC program, the form governing the coverage was later switchedto Travelers' by mid-July 2001. However, under questioning from Mr.Ostrager last week, Mr. Boyd said he couldn't remember ever seeingspecific information officially written down to alert carriersabout the change.

“Isn't it a fact, Mr. Boyd, that there is not a single piece ofpaper that states that as of any certain date [prior to Sep. 11,2001], the Wilprop policy form is not going to be the policy formfor the WTC placement” for the carriers in this trial? Mr. Ostragerasked.

Mr. Boyd replied: “I don't recall seeing a written document tothat effect.”

The question of whether the Wilprop form was used by thecarriers in their coverage binders is the principal issue in thisfederal trial, now in its fourth week.

In the court battle between Mr. Silverstein and 13 of hiscarriers, insurers contend they are bound to the Wilprop form(which defines “occurrence” and would limit the WTC claim to oneevent of $3.5 billion) rather than a Travelers form (which offersno such definition, and thus would be more beneficial to Mr.Silverstein's claim that when terrorists used two jetliners tobring down the WTC, it represented two separate occurrences forinsurance purposes and a loss of some $7 billion).

Mr. Silversteins attorneys acknowledge that many insurersreceived only the Wilprop form for the WTC underwriting submissionbefore they issued binders in the summer of 2001. However, theycontend that Wilprop was only “a starting point,” adding that whenTravelers insisted on using its own form, the Travelers documentbecame “the operative form.” Final policy documents were not signedbefore the terrorist event.

Mr. Boyd from Willis was one of the central players during theWTC placement. However, last week he often sounded unsure and attimes changed his testimony. He also volunteered extra commentariesthat tested the patience of Judge Michael Mukasey, who is presidingover the case.

For instance, when Mr. Ostrager asked whetherin thespecifications for underwriting submissions sent out to themarketplace in July 2001the term “manuscript form” referenced inthem meant the Wilprop form, Mr. Boyd initially said, “That iscorrect,” adding, “In this case, the form that was attached when Iwent out with the specs was the guideline Wilprop policy form.”

Moments later, however, Mr. Boyd retracted his answer: “That'snot correct. I misspoke… Because when we put manuscript form in aspecification, we know there is going to be a form eventually thatis tailored to that risk, and that's what we use in manuscriptform. And we keep that language in there whether we attach Wilpropor something else.”

Several times during Mr. Boyds testimony, Judge Mukasey askedhim to answer questions directly and later told him: “Mr. Ostrageris entitled to answers to questions that he poses. If you thinkthat the question introduces a matter that is incomplete, then thatis something that can be cleaned up by the other lawyers.” Thejudge added, “Otherwise, we are going to be here a lot longer thanwe would be.”

During his testimony, Mr. Boyd told the court he indeedconsidered Travelers to be “the lead insurer,” with its formgoverning the entire WTC insurance consortium. However, Mr.Ostrager countered Mr. Boyds claim by pointing out that Mr.Strachanwho had worked with Mr. Boyd on obtaining WTC insurancesaidin deposition testimony that “the whole concept of lead insurersand follow form has been introduced by the attorneys here.”

On the other hand, Mr. Strachan also said in deposition thatTravelers “did rise to the top and start fulfilling all therequirements” he would anticipate from a would-be lead insurer,adding, “If you are asking me who I thought the lead insurer wasgoing to be on the program, it is obviously Travelers.”

Nonetheless, he said, “there was never a lead insurer pickedprior to 9/11; this is a creation by all you guys.” In respondingto Mr. Strachans statements, Mr. Boyd told Mr. Ostrager, “I do seethat. I don't agree with it.”

Last week, the Willis executive who oversaw the marketing of theWTC placement in the London and European markets also began histestimony. The witness, Paul Blackmore–who at the time of the WTCplacement was a property insurance broker at Willis Londonoffice–told the court that the Wilprop form was the only form thathad been sent to Swiss Re before the reinsurer signed a slip (or abinder) to offer coverage on July 9, 2001. However, Mr. Blackmoresaid that the Wilprop form was provided only as “a startingpoint.”

In other news on the case, there was controversy on Feb. 24 whenJudge Mukasey raised the question of whether Mr. Strachan perjuredhimself when he was asked back as a witness the day before.

Mr. Strachan testified only for a brief period during hisrecall, to discuss a conversation he had on Sept. 12, 2001, with aninsurance representative from GMAC, which loaned $563 million toMr. Silverstein for his WTC lease. Mr. Strachan said that for themost part, he couldn't remember details of the conversation. WhenJudge Mukasey asked Mr. Strachan during his recall if he had anyconversations with Mr. Silverstein's lawyers, Mr. Strachan said,“no.”

However, at the start of the hearing on Feb. 24, Marc Wolinsky,one of Mr. Silversteins lawyers, revealed that he had actuallytalked with Mr. Strachan before his recall appearance. “I wanted toclear up something from Mr. Strachan,” Mr. Wolinsky told the judge.“I did meet with him briefly before he took the standyesterday.”

“You are telling me he perjured himself?” Judge Mukasey askedMr. Wolinsky, who quickly answered: “No, your Honor, I don't thinkhe perjured himselfI think he misunderstood your first question andthen continued from there.” Mr. Wolinsky went on: “He understoodthe question to be, did any lawyer tell you how to testify today?and the answer to that, truthfully, is no. No lawyer told [Mr.Strachan] how to testify.”

Judge Mukasey didnt appear to be entirely convinced: “It soundslike [Mr. Strachan] had a guilty conscience This whole business isgetting curiouser and curiouser; it really is.”

Reproduced from National Underwriter Property &Casualty/Risk & Benefits Management Edition, February 27, 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.

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