Court Rules On Allianz Motion In WTC Dispute

Currently, Mr. Silverstein is battling with more than 20 insurers, led by Swiss Re, over the property insurance of the WTC complex. The question of whether terrorists' destruction of the buildings represents one attack worth $3.5 billion or two multiple events, which would be worth about $7 billion, is at the center of the ongoing legal dispute.

In its motion, Allianz said its coverage was governed by an excess form that provided that all losses from "vandalism and malicious mischief" that take place during a single three-day period should be treated as one event, and that this definition would be applicable to the terrorists' attacks on the Twin Towers.

But Judge Martin stated that the WTC destruction resulted in an even greater loss of life and property than the raid on Pearl Harbor and that "it cannot be said that the ordinary businessman would consider an act of wanton terrorism such as the attack on the World Trade Center to be an act of malicious mischief or vandalism."

Judge Martin stated a jury should decide on Allianz's case instead. Currently, a jury trial involving Mr. Silverstein's insurers is being rescheduled while Mr. Silverstein pursues several appeals.

In response to the ruling, Howard J. Rubenstein, a spokesperson for Mr. Silverstein, said he is "extremely gratified."

"To date, insurers responsible for a total of $740 million of the $3.546 billion in coverage have failed in their attempts to limit or cut in half their obligation to pay for the rebuilding of the World Trade Center," Mr. Rubenstein said in a statement. "We remain confident in our position that the crashes of two separate planes into two separate buildings at two separate times entitle Silverstein and the other insureds to recover on a two occurrence basis."

Swiss Re, however, offered a different explanation of the judge's ruling. "While Judge Martin did rule as Silverstein claims with respect to malicious mischief, he also said the policy Allianz issued in August, which contains an occurrence definition, is the operative policy that controls Allianz' obligations to Mr. Silverstein, and that a jury should decide whether the Twin Towers destruction is one or two occurances based on the Allianz form," Swiss Re said.

"It's the Allianz form that controls, not the Travelers form, so it's a major loss for Silverstein," said Barry Ostrager, attorney at Simpson Thacher Bartlett who works with Swiss Re.

"What Silverstein is saying is pure fiction," Mr. Ostrager argued. "Not a single insurer, not one, has been adjudicated to owe more than one occurrence."

He continued that five insurers?ACE, XL, The Hartford, The St. Paul and Royal?have been adjudicated to owe only one occurrence. "And there will be a jury trial on Silverstein's claim that anyone owes more than one."

In a separate ruling, Judge Martin also granted Mr. Silverstein's motion to require Allianz and Zurich, Switzerland-based Swiss Re to produce notes of meetings held after Sept. 11 attacks, where an executive from Travelers Indemnity allegedly told the insurers that its form?which does not define the term "occurrence," and thus allows the two-occurrences interpretation for terrorists' attacks?controlled the coverage for the Twin Towers.

Additionally, the judge also ordered the Swiss Re executive who allegedly took the notes to testify about the meetings.

But in a response to the second ruling, Swiss Re stated the documents that the company will produce would have no negative impact on Swiss Re's case whatsoever. Furthermore, the Swiss Re executive referenced by Mr. Silverstein has already testified at deposition that he was not even present at the Oct. 3 meeting where a Travelers representative allegedly mentioned the Travelers form, a Swiss Re spokesperson said.

"That someone from Travelers, who had no involvement at all in the placement of the insurance at issue here, may have said post-9/11 that Travelers believed its form governed the WTC program does nothing to undermine the key and undisputed facts in this case," the spokesperson argued.

As of Sept. 11, 2001, there was no final policy in place for any insurer's coverage, including Travelers, according to Swiss Re. And the vast majority of insurers on the program, including Swiss Re, have bound coverage under the WilProp form, a form prepared by Mr. Silverstein's broker that contains a unique definition of the term "occurrence" and defines the Sept. 11 events as a single "occurrence" under the $3.546 billion per occurrence insurance program, the company spokesperson said.

Mr. Ostrager added, "There is not a scintilla of truth to what Silverstein is saying. We welcome the scrutiny to disprove everything Silverstein says."