WTC Broker Grilled

While Word Trade Center leaseholder Larry Silverstein's gag-order imbroglio generated a lot of headlines in recent days?"Gabby Silverstein Faces Contempt Rap," blared one banner in the New York Post, for example?there were also plenty of other fireworks in the ongoing WTC insurance dispute.[@@]

For instance, there was more intense grilling on the menu for an executive from Willis Group Holdings, Mr. Silverstein's broker for the WTC insurance placement?with fiery exchanges between the witness and various attorneys.

Under questioning by Eric Roth, an attorney for Mr. Silverstein, Timothy Crowley?a senior vice president at Willis of New York, who served as the account executive for Mr. Silverstein's WTC insurance placement?testified that Mr. Silverstein's risk manager, Robert Strachan, had authorized him on July 12, 2001 to bind coverage with a Travelers Property Casualty's form for the entire program.

By that time, Mr. Crowley asserted, he had "no options," and that he knew Willis was "going to have to use the Travelers policy."

The form question goes to the heart of the current federal jury trial setting Mr. Silverstein against 13 of his insurers covering the WTC loss. The central issue is whether these insurers are bound to the Willis Property form?also called "Wilprop"?which would limit the coverage to $3.5 billion, or to a Travelers form, which leaves open the possibility that there were two separate losses totaling some $7 billion. Final policy documents were not signed before the Sept. 11, 2001 terrorist attack that brought down the Twin Towers.

However, under questioning by Barry Ostrager, the lead attorney for Swiss Reinsurance Company, a number of inconsistencies in Mr. Crowley's sworn statements began to emerge.

Mr. Ostrager first noted that Mr. Strachan had in effect never evaluated the Travelers coverage. "Is it your testimony that [Mr. Strachan] provided that authorization to you without ever reviewing the Travelers coverage at all?" Mr. Ostrager questioned. Mr. Crowley acknowledged, "I believe that's so."

Mr. Ostrager then alluded to the fact that as of July 12, 2001, neither Mr. Crowley nor Timothy Boyd?an assistant vice president at Willis, who was responsible for securing WTC coverage for Mr. Silverstein?had actually looked at any Travelers specimen forms.

"So your testimony is, as client advocate, that you recommended to your client that your client bind three-plus-billion dollars of coverage on a form that neither you nor your lead placing broker knew anything about?" Mr. Ostrager inquired. "Your testimony is that you recommended to Mr. Strachan that [Mr.] Silverstein bind three-plus-billion dollars of coverage on a form that you personally had never read?"

Mr. Crowley acceded: "I personally had not read the policy."

Furthermore, Christopher Finazzo, one of the attorneys for Employers Insurance of Wausau, referred to an e-mail copied to Mr. Crowley that Mr. Boyd had sent to Lexington Insurance Company?one of the insurers represented in the trial?on July 11, 2001. In the electronic message, Mr. Boyd urged Lexington Insurance to "please send the policy form requirements as promised." However, the Travelers specimen forms were never sent to Lexington by that time.

"It's your testimony that by that time you had no options, and you knew you were going to have to use the Travelers policy," Mr. Finazzo said. Then, he grilled Mr. Crowley: "How is it that you would expect Lexington to be able to give you form requirements on the form they didn't have?"

Mr. Finazzo then asked: "Mr. Crowley, when you received this e-mail, did you ask Mr. Boyd, ?Tim, did you send Lexington the Travelers policy so that they could give you their form requirements on that policy?'"

"No," Mr. Crowley responded.

"Why did you not do that?"

Mr. Crowley countered that this was in "the midst of the whole process," and at some point in time, Mr. Boyd would handle "that part of the procedure as far as advising the markets."

Mr. Finazzo also inquired about another e-mail correspondence, from July 16, 2001, that Mr. Boyd sent to another underwriter, NIF, and copied to Mr. Crowley. In his message, Mr. Boyd wrote, in part, that he had attached Wilprop in the e-mail and that "this form will be modified to reflect Travelers and Lexington form requirements," while adding that the Travelers form may also be used.

"But did you think it was a requirement that the Travelers form had to be used?" Mr. Finazzo asked Mr. Crowley. "Yes," Mr. Crowley replied.

"Well, when you read it, did you think it violated this requirement that you say Travelers had?that only its form be used?" Mr. Finazzo inquired. "Can you agree with me, Mr. Crowley, a reasonable underwriter reading this could conclude that you may use Wilprop?"

Mr. Crowley countered that this was a point in time "where we were scrambling?[Mr. Boyd] was seeing if there was any more additional capacity out there, and he threw together a quick e-mail to the underwriter," adding that Mr. Boyd was "not clear in his writing of that sentence."

Mr. Finazzo quizzed whether Mr. Crowley had any conversation with Mr. Boyd as to why he was telling NIF the Wilprop form may be used and why that form was attached in the electronic message.

"Not that I recall," said Mr. Crowley, who added that he was further distracted during that time and during the beginning of August because his mother had just passed away. "My mother's funeral was on Aug. 3," Mr. Crowley recalled.

Mr. Finazzo also pointed out that despite Mr. Crowley's assertion that Travelers' form had to be used for the entire program, some insurers had already bound explicitly on Wilprop.

"At some point I came to the knowledge that ACE and XL were bound on Wilprop," Mr. Crowley acknowledged. (XL Capital Ltd. and ACE Ltd., both based in Bermuda, have already settled with Mr. Silverstein for some $365 million on the basis of the one-occurrence policy with Wilprop.)

Mr. Finazzo asked: "When you came to the knowledge that ACE and XL were bound on Wilprop, what did you do about it? It was a violation, right?"

Mr. Crowley acceded: "It was an area where we didn't have total continuity, but it was up high [in the insurance layer]. It was a work in progress."