In any event, Mr. Silverstein is not entitled to actual cash value proceeds at this time, said Swiss Re, because the Wilprop form mandates that he first disclaim any intention to rebuild. Swiss Re said that Mr. Silverstein's only recourse is to seek replacement cost value proceeds up to the $3.5 billion policy limit.

Regardless of what form it takes or who rebuilds it, “the WTC will be rebuilt over eight or nine years,” Swiss Re predicted. Calculating rebuilding costs at slightly less than $300 per square foot, Swiss Re said the replacement cost value of the property will approach the policy limit of $3.5 billion. When discounted to net present value, the amount is approximately equal to Mr. Silverstein's own pre-litigation estimate of $2.4 billion, according to Swiss Re.

Swiss Re cautioned that not all of these proceeds will be available for rebuilding, due to the amounts of business-interruption proceeds that would be paid from the same policy limit.

Swiss Re America Holding Company Chairman and CEO Jacques Dubois said that when seeking coverage in 2001, Mr. Silverstein “told us that the value of the property, including business interruption insurance, was $5 billion,” but he declined to pay the premium for that and instead bought $3.5 billion of coverage.”

He added that “the WTC was destroyed only once, and under the property insurance coverage purchased–in fact, under any property insurance coverage–Silverstein is entitled only to a maximum of the policy limit of $3.5 billion.” Mr. Dubois said that Mr. Silverstein himself “admitted that the coordinated attack on Sept. 11 was a single occurrence in his one-occurrence settlements with insurers ACE and XL.”

Mr. Dubois was referring to a $365 million settlement announced in February between Mr. Silverstein and two Bermuda-based WTC insurers–ACE Ltd. and XL Capital Ltd. Mr. Silverstein conceded in that settlement that there was only one WTC attack on Sept. 11.

At the time, a Silverstein official said the real estate developer had agreed to settle because the ACE and XL policies were worded differently from other insurers. Swiss Re countered that all WTC insurers had agreed to the same policy.

Marc Wolinsky, an attorney in Wachtell, Lipton, Rosen & Katz, the New York law firm representing Mr. Silverstein's interests, dismissed Swiss Re's latest comments as a mere reaction to an Aug. 2 statement. On Aug. 2, Silverstein Properties stated that reports by Tishman Construction Company–which originally erected the WTC–and accounting firm Deloitte & Touche put the actual cash value of rebuilding the WTC complex at $5.7 billion. Mr. Wolinsky said that this figure represents replacement cost minus depreciation of the two towers and surrounding edifices.

The Silverstein statement also indicated that business interruption losses for the office components of the complex would exceed $2.5 billion. The statement said that the expert reports had been submitted to the WTC insurers.

Mr. Wolinsky said he didn't understand what Swiss Re meant by the “policy interpretation issue” it raised. “The Traveler's policy has a definition of actual cash value that is not substantively different from the Wilprop, and we think the proper reading is you get the value to replace what was there,” he stated.

Regarding the settlement with ACE and XL, Mr. Wolinsky cited strategic and business reasons for taking a single policy limit from them, including the existence of a mandatory arbitration clause that would have required taking the matter to London. “The bottom line is that everyone agrees ACE and XL were never told about the Travelers form, and that their binder has an express reference to Wilprop,” Mr. Wolinsky stressed. He explained that the ACE and XL documents expressly stated that “the form is Wilprop until something else comes along.”

He said that “rather than buck the fact that they had this unique language in their binder, we settled.” Best of all, “we got money–there's nothing wrong with money,” Mr. Wolinsky stated.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, August 12, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.