WTC Jury Must Answer $3.5 Billion Question

After 10 weeks of conflicting testimony from dozens of witnessesand hundreds of exhibits involving technical policy language thatcould baffle the most seasoned insurance executive, the $3.5billion World Trade Center coverage dispute is scheduled to behanded over to a jury this week.

Now its up to the jurorsseven men and five women, none of whomwere familiar with the arcane world of insurance policy terms andconditions before this trialto make heads or tails out of thehighly complicated and often-contradictory evidence presentedbefore them.

Last week, attorneys from both camps put on their closingarguments. Herbert Wachtell from the New York law firm WachtellLipton Rosen & Katz, the lead attorney for WTC leaseholderLarry Silverstein, argued that the evidence shows the 13 WTCinsurers are saying they were bound to a “Wilprop” form issued byMr. Silversteins brokerage firm, Willis Group, simply because theywant to minimize their payments.

Mr. Wachtell tried to minimize the damage that Mr. Silverstein'srisk manager, Robert Strachan, inflicted on Mr. Silversteins case.Jurors heard that Mr. Strachan faxed a Wilprop form on Sept. 12,2001the day after the terrorist attackto GMAC, which lent $563million to Mr. Silverstein for his WTC lease, and to the WTC'sowner, the Port Authority of New York and New Jersey.

Furthermore, on his fax, Mr. Strachan had scribbled “This is it”next to Wilprops occurrence definition, which would interpret theWTC's destruction as a single event with a coverage limit of $3.5billion. Mr. Strachans action that day, insurers argued, helpsprove that Wilprop was the governing form.

However, Mr. Wachtell countered, the evidence shows that in themidst of turmoil at Mr. Silverstein's offices the day after 9/11,Mr. Strachan was pressured by GMAC and Port Authorityrepresentatives to “send them something.”

He also told jurors repeatedly that Timothy Boyd, the Willisbroker responsible for securing WTC coverage, e-mailed Mr. Strachana copy of a Travelers form (which is more vague on its definitionof “occurrence,” and which could be interpreted to pay out some $7billion for two events), but that Mr. Strachan couldnt receive itbecause the file size exceeded Mr. Strachans Yahoo e-mail accountlimit.

Mr. Wachtell reiterated his position that Mr. Boyd had switchedto a Travelers form after Travelers had insisted that its form beused for the entire coverage. He also argued that Lloyd's of Londoninsurers had agreed to waive the policy forms wording when theysigned onwhich, he claimed, allowed Mr. Silverstein to decide laterwhat form would apply.

Mr. Wachtell added that none of the 13 insurers made anyexplicit notations requiring Wilprop to be the policy form. After9/11, “everybody's got a story,” Mr. Wachtell said, but before theattack, “nobody bound these insurers to Wilprop.”

However, on April 15, insurers presented their side of thestory, rebuking Mr. Wachtell's remarks.

Barry Ostrager from the New York law firm Simpson Thacher &Bartlett, the lead attorney for Swiss Reinsurance, told jurorsthere was no final policy form in place before the terrorist attackand that the form that governed Swiss Res coverage at that time wasindeed Wilprop. But he said that after 9/11, attempts have beenmade by others to switch the form to the one from Travelers.

The switch to a Travelers form is a story that Willis puttogether to maximize the potential return for its client, Mr.Ostrager told jurors. He also reminded the jury how Fenn Harvey, aWillis wordings expert, had testified that as long as his clientwasnt doing anything illegal, he would “say anything for them.”

Mr. Ostrager also reminded the court that Mr. Harvey had triedto send a Travelers form to Allianz, which had already issued itsWTC coverage policy using its own form.

Additionally, Mr. Ostrager focused on Swiss Re's underwriter,Daniel Bollier, who testified that he never knew there was anyswitching of the policy form from Wilprop until he received the“Notice of Loss” on Sept. 24, 2001.

Mr. Ostrager told jurors that he believes Mr. Bollier was acredible witness, but that if jurors dont believe Mr. Bollier, thenthey can go ahead and vote that Swiss Re didnt bind on Wilprop. Butif jurors do find Mr. Bollier credible, they have to find thatSwiss Re did bind on Wilprop.

Mr. Bollier, Mr. Ostrager reminded jurors, had sent a bindingslip for Swiss Re based on Wilprop on July 9, 2001 that wasaccepted by Willis on July 18. Mr. Ostrager reiterated there was“never any documentation” that shows Mr. Bollier receiving aTravelers form as a new valid governing form.

Mr. Ostrager also reminded the jury about Mr. Silversteins riskmanager. He noted that in addition to faxing Wilprop to GMAC andthe Port Authority the day after the terrorist attack, he hadwritten personal notes in the aftermath of 9/11, “WTCunderinsured.”

Mr. Strachan, Mr. Ostrager said, has been testifying that hedidnt know about the Travelers form, so Mr. Strachan's actions werebased on the actual information that he had at the time.

Reproduced from National Underwriter Edition, April 16, 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.