A Manhattan federal jury has ruled in favor of World Trade Center leaseholder Larry Silverstein, declaring that the hijacked planes that destroyed the Twin Towers count as two separate attacks for insurance purposes.
"This is a win for all New Yorkers," Silverstein said. "Today's decision means an additional billion dollars of insurance proceeds will be available, which, together with Liberty Bonds, will ensure a timely and complete rebuild of the World Trade Center. I strongly felt, and the jury agreed, that the destruction of the Twin Towers by two separate airplanes at two separate times was two separate occurrences and that these insurers have an obligation to pay their fair share to help make Lower Manhattan whole again."
In the second phase of Silverstein's suit against his insurers, nine companies argued that the Sept. 11, 2001, attack against the complex should be defined as one compensable event. Together, the nine insurers — Allianz, Industrial Risk Insurers, Travelers, Royal Specialty, Gulf, Zurich American, TIG, Twin City, and Tokio Fire and Marine — represent $1.132 billion of the $3.55 billion of overall property coverage on the towers.
As a result of the jury's finding, Silverstein may be able to collect double the per-occurrence coverage amount from the insurers involved in this phase of the trial. Originally, Silverstein had sought $7 billion, or double the policy amount. Following an earlier verdict that favored insurers, however, the maximum that he could collect is less than $5 billion. The precise figure will be determined at a separate appraisal phase, a non-jury proceeding that will value the 10 million square feet of property destroyed.
In the earlier trial that concluded in May, the jury found that 10 of the 13 insurers involved were bound by the Willis Property form, which specifically defines an event such as the terrorist attacks as one insurable occurrence, limiting insurers to one payout. In the first trial, about 68 percent of the $3.55 billion of the WTC property coverage had been adjudicated as a single occurrence.
The remaining three companies, Royal Specialty, Zurich American, and Twin City, proceeded into the second trial, as jurors found that they were not bound by WilProp. In the latest trial, WilProp was not the main point of dispute. Jurors simply were asked to examine whether the attack should be seen as one event or two in light of each separate form used by the individual insurers.
The verdict, so different from that in May, took insurers by surprise. "We are pretty disappointed, especially because this is contrary to the outcome of phase one, which determined for two-thirds of the participants of the WTC insurance program that the 9/11 attack was one occurrence," said Ashraf El Sharkawy, a spokesman for Allianz.
David Wood, a partner at the law firm Wood & Bender, analyzed the jury's conclusion. "The jury was asked to interpret what a preprinted form meant at the time that the policyholder bought the policy, and the preprinted form was drafted by underwriters months or years before the policy was ever sold," he said. "The carriers tried to argue that everybody knew what these words meant at the time that they were purchased. The jury seems to have focused in on the fact that one party takes on the risk of the unforeseeable; when you write a preprinted form, that's the insurance company."
Soon after the verdict was released, Allianz and many of the other carriers involved announced plans to appeal. Silverstein also has filed an appeal, requesting a review of the trial's first phase from the U.S. Second Circuit Court of Appeals.
Although insurers potentially face paying out twice as much as they had hoped, they say that the final result will have little fiscal effect. Most of those involved released statements announcing that neither earnings nor reserves would be affected materially.
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