Insurers Relieved Of $700M WTC Claim

Developer Larry Silverstein will make no decision until well into next year on whether to appeal a federal judge's ruling last week that insurers need not pay $700 million in additional World Trade Center rebuilding costs.

Indeed, Bud Peronne, Mr. Silverstein's representative, said no appeal decision will be made until the appraisal process for determining replacement costs is complete, which he does not expect for several months.

In last week's ruling, U.S. District Court Judge Harold Baer in Manhattan rejected arguments that insurers needed to provide the extra payments for safety and political acceptability as “replacement” costs.

“If the parties had intended to allow the insureds to take those factors into account–i.e., to build a bigger and better building, and thereby recover an additional $700 million–it stretches credulity to suggest they would not have made this understanding explicit,” Judge Baer wrote.

“No American court has ever held that structural changes of the scale and cost that [Mr.] Silverstein envisions are included in the 'replacement cost,' let alone 'replacement cost' limited by a 'comparable size, material and quality' clause,” the judge wrote.

Among the insurers involved in the claim were affiliates of Allianz A.G. Holding, St. Paul Travelers Companies Inc., Swiss Reinsurance Company and Zurich Financial Services A.G.

The ruling “will not affect the total amount of insurance available to rebuild the World Trade Center, or negatively impact the timetable for construction,” Mr. Peronne said in a statement.

Planning is well underway for the centerpiece of the reconstruction project–the 1,776-foot tall Freedom Tower, whose design was the subject of a long public hearing and political debate process. Preliminary sketches have been made for three other buildings on the site.