Silverstein On Hot Seat At WTC Trial

WTC leaseholder Larry Silverstein was banned from the courtroom and faced potential contempt of court charges last week after insurance company attorneys complained that he violated a judge's gag order to not discuss the case in public.

As this edition went to press, Mr. Silverstein was being questioned on the witness stand by insurer attorneys. However, at the beginning of the March 18 hearing, U.S. District Court Judge Michael Mukasey said “there are some precautionary measures I will take.”

He decided that “henceforth, Mr. Silverstein will not sit in the courtroom” and will have to rely on his representatives to keep him informed about the trial's progress. “I have to control people here in my courtroom,” said the judge. “Apparently there is so much money at stake here, people are willing to do anything.”

The lawyers for Mr. Silverstein urged the judge not to go on with the contempt hearing because of the danger of influencing jurors through negative publicity. Mr. Silverstein said on the stand that he had misunderstood the judge's instructions and thought that on or around March 10, the gag order had been modified.

During a Ground Zero news conference on March 15, Mr. Silverstein criticized his insurers in the case for refusing to pay him the $7 billion that he says he deserves. “We're trying to get them to fulfill the responsibilities that we paid for when we paid the premiums on the policies,” he told reporters. But, he added, “instead of getting insurance, we've got ourselves a massive amount of litigation.”

Speaking at the new 7 World Trade Center building currently under construction, Mr. Silverstein also said rebuilding the WTC site would cost roughly $12 billion, much higher than some earlier estimates. “We're fighting hard with the insurance companies to achieve the money that's going to be necessary [to rebuild],” he said.

In other developments at the trial last week, a wholesale broker who worked on soliciting coverage for the World Trade Center during the summer of 2001 said the operating policy form was being switched that July at the insistence of Travelers Property Casualty, but that he didnt inform a number of participating insurers about the intended change before the Sept. 11 terrorist attack.

This testimony came from Harry Tucker, senior vice president of property management at Stewart Smith, a wholly-owned wholesale unit of Willis Group Holdings.

Mr. Tucker recounted that he learned about the intended change when he received an e-mail from Tim Boyd an assistant vice president at Willis who worked on obtaining the WTC coverage on July 11, 2001.

The key issue in the trial, pitting WTC leaseholder Larry Silverstein against 13 of his insurers, is which form was used by carriers in their binders. Insurers say they are bound to the Willis property form also called “Wilprop” which would limit Mr. Silverstein's claim to one event of $3.55 billion, rather than a Travelers form, which would help Mr. Silverstein's claim that two planes crashing separately into the Twin Towers constitute two insured occurrences. Final policy documents were not signed before the attack.

Mr. Tucker also said he had a meeting with Willis brokers the following day. “There was a large group of us that met on July 12 later in the morning,” he noted.

“What did you understand this was saying about Travelers' participation in the program?” Barbara Robbins, an attorney representing Mr. Silverstein, asked in cross-examination. Mr. Tucker recounted: “That to gain [Travelers] support and participation, [Willis] wanted to issue the primary [coverage] using their form.”

Ms. Robbins asked, “Now, when you left the meeting, was it your understanding that the decision to use the Travelers form was a firm decision?”

“Yes,” Mr. Tucker said. However, he also acknowledged that insurers contacted by Stewart Smith for the WTC program weren't informed about the intended switch and didn't have access to the new Travelers' form.

Stewart Smith first got involved in the WTC program when Willis brokers asked Mr. Tucker in June 2001 to solicit coverage from insurers that Stewart Smith typically deals with. Mr. Tucker said he received an underwriting submission that Willis had prepared, but the submission contained only the Wilprop form.

“And as part of that submission, Mr. Boyd sent you a copy of the Wilprop 2000 form, right?” Michael Barr, lead attorney for Royal Indemnity Company, asked Mr. Tucker in direct examination.

“Yes, he did,” Mr. Tucker answered.

Mr. Barr then asked: “Am I correct that Wilprop was the only form Mr. Boyd forwarded to you with that underwriting submission?”

Mr. Tucker: “Yes, it was.”

Mr. Barr: “And you never got a Travelers specimen form from Mr. Boyd at any time prior to September 11th, is that correct?”

Mr. Tucker: “That is correct.”

Mr. Tucker recounted that after receiving the underwriting submission from Willis, he sent a submission to a dozen different insurers Stewart Smith deals with, including Royal Specialty Underwriting, Twin City Fire Insurance Company and The St. Paul. All three decided to participate in the program. (Royal Specialty and Twin City are both represented in this trial, but in The St. Paul's case, a court had determined that it was tied to the Wilprop form, a decision which was later upheld by the Second U.S. Circuit Court of Appeals in New York.)

Mr. Barr asked: “Now, you did not actually attach the Wilprop form to the e-mail that you sent to various underwriters, correct?”

“I did not,” Mr. Tucker replied.

Mr. Barr: “But when one of those carriers asked you for a copy of the form, you sent them the Wilprop form, correct?”

Mr. Tucker: “I did.”

Mr. Barr: “And that was St. Paul, right?”

Mr. Tucker: “Yes.”

Mr. Barr then asked: “And as you sit here today, you know that it's been determined that St. Paul bound on the Wilprop form, correct?”

“There was a ruling, I understand,” Mr. Tucker said.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, March 19, 2004. Copyright 2004 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.

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Silverstein On Hot Seat At WTC Trial

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