WTC CLAIMS WAR OF WORDS CONTINUES AS GOV. SEEKS SETTLEMENT:

Despite the earnest efforts of New York’s governor George Pataki to find a quick solution to the dispute between Silverstein Properties and Swiss Re over the amount to be paid for the destruction of the World Trade Center, both sides seem determined to plow ahead with their litigation, in the courts and in the press. The dispute centers on whether the destruction of the Twin Towers constituted one event (Swiss Re’s position), or two separate events (Silverstein’s position). Approximately $3.5 billion rests on the answer, which a jury is now slated to determine in a trial scheduled to begin late this year at the earliest. The Governor is concerned that the protracted dispute will delay the start of reconstruction of the WTC site, but given the invective between the two sides, it’s hard to imagine that any compromise can be achieved. Swiss Re ramped up the dispute with a press release detailing the efforts it has made to settle the matter, and citing Silverstein’s intransigence as the main roadblock. “For two years Swiss Re has performed, and continues to perform, in accordance with the terms of our insurance contract. According to that contract, World Trade Center leaseholder Larry Silverstein can recover up to $3.5 billion of insurance proceeds paid out over time as he rebuilds,” said the bulletin. “Meanwhile, Silverstein’s litigation efforts continue to delay resolution, causing significant erosion of the money available for rebuilding. Silverstein is a private developer who wants to control Ground Zero. Toward that end, he has promised the public he is entitled to collect two policy limits from his property insurers. His promise rings false after the U.S. Court of Appeals categorically rejected his appeals and increased to five the number of insurers thus far conclusively liable for a maximum of one policy limit.” Swiss Re charged that, “Silverstein continues to erode the insurance proceeds available so that he can pay lobbyists, lawyers and PR advisers who contribute nothing to rebuilding. The insurance companies have advanced $1.9 billion in insurance proceeds to date; $600 million has been allocated to Silverstein for WTC expenses.” It went on to note that these expenses included: $100 million in legal fees; his claim for management fees (on buildings that no longer exist); his failure to account for insurance proceeds, and his fight with his principle lender GMAC. It also noted that the leasehold investors continue to profit from tax benefits built into the lease. Silverstein’s lawyers fired back with a press release of their own, charging that, “Swiss Re’s statement contains misstatements, distortions and half-truths. This bears the earmarks of a foreign insurer desperate to protect its pocket book to the detriment of New York.” Howard J. Rubenstein, representing Silverstein, pointed out that the Port Authority was also a party to the lawsuits, as it recognizes “the insurance recovery is essential for the rebuilding of lower Manhattan.” He went on to charge that Swiss Re has so far paid only $49 million, roughly 6 percent of the $3.5 billion and that its $1.9 billion figure was therefore misleading as the bulk of it had in fact been paid by other insurance companies. He also noted that motions filed by other insurers to avoid a jury trial had been rejected in four out of seven cases, and stressed his client’s position that “the crashes of two airplanes into two buildings entitles Silverstein and the Port Authority to recover on a two occurrence basis is not an outrageous claim,” as it “has been endorsed by Attorney General Spitzer, Gov. Pataki and the Property Loss Research Bureau, an insurance industry think tank.” He also stressed that the ultimate decision still lies with the jury, and has not been decided yet. The bulletin defended Silverstein’s position that the Travelers form controlled the parties obligations, not the WilProp form, and disagreed with Swiss Re’s assertions that Silverstein hadn’t provided an adequate accounting and was not using the insurance proceeds to pay legitimate expenses. The money had mostly gone to pay “rent to the Port Authority and debt service to GMAC and other lenders.” It added that “Swiss Re’s speculation that $100 million has been paid to lawyers is just that—speculation. And Silverstein is absolutely entitled to management fees to cover the costs of managing the rebuilding process.” Perhaps Gov. Pataki is justified in trying to get the two sides to agree on a settlement. There is a real risk that rebuilding on the WTC site could be delayed, perhaps for years, while the litigation works its way through the courts. As the highest state official, it’s his job to push for a solution that will most benefit the people of New York, and particularly lower Manhattan. Unfortunately, despite a lot of rhetoric to the contrary, neither Swiss Re nor Silverstein can afford to take such a position given the amount of money at stake. There isn’t a single word in either of their press releases that would indicate they are ready to bargain in good faith. Given the extreme rancor the case has already produced, both in the courtroom and in the press, Gov. Pataki’s quest for a settlement looks like a mission impossible.

Topics New York Claims