Silverstein On Hot Seat At WTC Trial

WTC leaseholder Larry Silverstein was banned from the courtroomand faced potential contempt of court charges last week afterinsurance company attorneys complained that he violated a judge'sgag order to not discuss the case in public.

As this edition went to press, Mr. Silverstein was beingquestioned on the witness stand by insurer attorneys. However, atthe beginning of the March 18 hearing, U.S. District Court JudgeMichael Mukasey said “there are some precautionary measures I willtake.”

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

The lawyers for Mr. Silverstein urged the judge not to go onwith the contempt hearing because of the danger of influencingjurors through negative publicity. Mr. Silverstein said on thestand that he had misunderstood the judge's instructions andthought that on or around March 10, the gag order had beenmodified.

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

Speaking at the new 7 World Trade Center building currentlyunder construction, Mr. Silverstein also said rebuilding the WTCsite would cost roughly $12 billion, much higher than some earlierestimates. “We're fighting hard with the insurance companies toachieve the money that's going to be necessary [to rebuild],” hesaid.

In other developments at the trial last week, a wholesale brokerwho worked on soliciting coverage for the World Trade Center duringthe summer of 2001 said the operating policy form was beingswitched that July at the insistence of Travelers PropertyCasualty, but that he didnt inform a number of participatinginsurers about the intended change before the Sept. 11 terroristattack.

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

Mr. Tucker recounted that he learned about the intended changewhen he received an e-mail from Tim Boyd an assistant vicepresident at Willis who worked on obtaining the WTC coverage onJuly 11, 2001.

The key issue in the trial, pitting WTC leaseholder LarrySilverstein against 13 of his insurers, is which form was used bycarriers in their binders. Insurers say they are bound to theWillis property form also called “Wilprop” which would limit Mr.Silverstein's claim to one event of $3.55 billion, rather than aTravelers form, which would help Mr. Silverstein's claim that twoplanes crashing separately into the Twin Towers constitute twoinsured occurrences. Final policy documents were not signed beforethe attack.

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

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

Ms. Robbins asked, “Now, when you left the meeting, was it yourunderstanding that the decision to use the Travelers form was afirm decision?”

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

Stewart Smith first got involved in the WTC program when Willisbrokers asked Mr. Tucker in June 2001 to solicit coverage frominsurers that Stewart Smith typically deals with. Mr. Tucker saidhe 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 theWilprop 2000 form, right?” Michael Barr, lead attorney for RoyalIndemnity Company, asked Mr. Tucker in direct examination.

“Yes, he did,” Mr. Tucker answered.

Mr. Barr then asked: “Am I correct that Wilprop was the onlyform Mr. Boyd forwarded to you with that underwritingsubmission?”

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 underwritingsubmission from Willis, he sent a submission to a dozen differentinsurers Stewart Smith deals with, including Royal SpecialtyUnderwriting, Twin City Fire Insurance Company and The St. Paul.All three decided to participate in the program. (Royal Specialtyand 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 Wilpropform, a decision which was later upheld by the Second U.S. CircuitCourt of Appeals in New York.)

Mr. Barr asked: “Now, you did not actually attach the Wilpropform 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 copyof 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 thatit'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 serialpublication. All rights reserved. Copyright in this article as anindependent work may be held by the author.