Silverstein Pleads Ignorance
Left WTC coverage details to risk manager, broker
World Trade Center leaseholder Larry Silverstein testified last week that he was basically clueless about the technical details of insurance coverage purchased for his WTC complex, delegating that job to his risk manager and brokers.
The long-awaited testimony by Mr. Silverstein in the Twin Towers insurance trial turned out to be very brief with Mr. Silverstein being ushered on and off the stand in less than 30 minutes. He had to leave the courtroom after his testimony and will not be permitted to return unless he is recalled for further questions is punishment for violating a judicial gag order (see story, page 6).
Mr. Silverstein described himself as an executive who stayed above the technicalities involved in obtaining the WTC's insurance. He told the jury that in July 2001 he was eager to obtain the WTC insurance coverage as soon as possible to complete his 99-year lease transaction, but said he left the specifics of the insurance placement including the decision on the program's policy form to his risk manager, Robert Strachan, and his broker, Willis Group Holdings.
The Port Authority of New York and New Jersey, which owns the WTC, "gave us a time schedule, pursuant to which they were seeking to close the transaction, as I recall, in the early part of July of 2001," said Mr. Silverstein in direct examination by Herbert Wachtell, the lead attorney for Mr. Silverstein.
He recounted that GMAC which loaned $563 million to Mr. Silverstein for his WTC lease had a time constriction of its own. "They were intent on securitizing their debt" before August 2001, by "breaking their mortgage, which they were about to issue, into units which would in turn be sold to the public as securities, and those securities would be backed by the mortgage on the property," Mr. Silverstein said.
"We had to acquire the insurance from insurance companies of a specific quality, in an amount sufficient to serve the needs of the Port Authority and of GMAC," he added.
In early July, Mr. Silverstein said, "I was deeply concerned about meeting the timetable set for the closing and was keenly aware of the requirement to have insurance of the amount and the quality necessitated in time for that closing. And I recall discussing that with [WTC risk manager Robert Strachan] and telling him, whatever we had to do, we had to do it we had to get it closed, get it done."
Mr. Silverstein also recounted, however, that he left insurance details to his risk manager and that he didn't have any knowledge as to what form may have been used in the placement.
"Do you have any knowledge as to whether anybody in fact then bound authorizations as they came in?" asked Mr. Wachtell. "Direct knowledge, no," Mr. Silverstein replied.
"Do you have any knowledge or information as to what policy form or forms were involved in the placement?" Mr. Wachtell then asked. "No, I do not," Mr. Silverstein said.
The form question is critical in the trial pitting Mr. Silverstein against 13 of his insurers covering the loss of the World Trade Center in the Sept. 11, 2001 terrorist attack. Jurors in the trial must decide whether insurers are bound to the Willis Property form, whose "occurrence" definition would limit 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.
Mr. Silverstein said he first began to focus on the specifics of the WTC insurance coverage only after the Sept. 11 attack, when he received a call from "a very good friend" who said there could be "a major problem" regarding insurance on the property. "The night of Sept. 12 or early morning of Sept. 13, I received a telephone call from a very good friend who is knowledgeable with respect to insurance issues," Mr. Silverstein recounted, "and who told me that I was facing a major problem and that I had to begin to focus on the insurance coverage that was in place at the Trade Center."
"His suggestions were to get myself counsel quickly," Mr. Silverstein told jurors.
Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, March 25, 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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