Swiss Re, Developer Continue to Dispute WTC Cost

Despite submitting separate settlement offers to a federal judge in Manhattan, Swiss Re and World Trade Center developer Larry Silverstein have yet to come to an agreement over the amount of compensation insurers and reinsurers owe after the Sept. 11 terrorist attacks.

According to The New York Times, Silverstein and partners have filed numerous lawsuits contending entitlement to a double payment of $7 billion—they consider the attacks on the twin towers as separate incidents. Swiss Re and other WTC insurers, however, continue to argue that the Sept. 11 attacks constituted a single event, and that they are liable for a total of $3.55 billion.

Representing a coalition of 20 insurers and reinsurers, Swiss Re’s settlement offer totaled $1.8 billion after deprecation, while Silverstein offered a $5.7 billion settlement. Now that the court-ordered settlement has fallen through (as expected), the two sides are gearing up for a jury trial scheduled for November. The trial is intended to determine the amount of compensation owed to Silverstein, who leased the WTC complex from the Port Authority of New York and New Jersey last year.

Swiss Re America chairman Jacques Dubois has expressed little hope in settling the dispute, and expects to go to trial.

U.S. District Court Judge John Martin persuaded the insurers and Silverstein to try to reach a settlement, and appointed Judge Lewis Kaplan as a mediator. Despite these attempts to end the dispute, both sides believe they will have the upper hand when the trial begins. Jury selection begins Nov. 4 and opening arguments on Nov. 12.

How the term “occurrence” is defined depends on the type of language used in a policy. But the WTC had no formal policy drawn up—there was only a binding agreement stipulating that a policy would be formed under certain guidelines.

Those guidelines are at the crux of the current dispute. Swiss Re contends that “occurrence” has been defined in documents from an insurance broker under Silverstein’s employ. Those documents define a single occurrence as one “attributable directly or indirectly to one cause or to one series of similar causes.”

Silverstein holds that the decision as to what constitutes a single occurrence should depend on a form devised by Travelers—not the one drawn up by his broker—that would deem the WTC attacks as separate occurrences. While Silverstein argues that the form used by his own broker be ignored in favor of Travelers’, that carrier has ironically taken sides with Swiss Re against the developer.

Swiss Re announced Aug. 3 that the total actual cash value amount of the WTC complex was an estimated $2.16 billion under the Willis Property form (Willprop), and that Silverstein could never recover more than $3.5 billion. The reinsurer went further by stating Silverstein is not entitled to actual cash value unless he first declaims any intention to rebuild on the WTC site. The developer’s only course of action would be to seek replacement cost value proceeds up to his policy limit of $3.5 billion.