Silverstein, Insurers Reach $2 Billion WTC Settlement
Bloomberg | May 24, 2007
Developer Larry Silverstein and seven insurance companies agreed to a $2 billion settlement to end an almost six-year dispute over the value of the insurance policies covering the World Trade Center.
New York Governor Eliot Spitzer and Insurance Superintendent Eric Dinallo announced the settlement at a news conference in lower Manhattan. The agreement will bring to about $4.55 billion the total insurance proceeds Silverstein and the Port Authority of New York and New Jersey will receive.
Silverstein, the leaseholder on the World Trade Center, had battled with insurance companies in federal court since a month after the Sept. 11, 2001, terrorist attacks over how much the policies were worth. The settlement gives the developer and the Port Authority, the site's owner, the cash to help rebuild the 16- acre property. The insurers have already paid about $2.55 billion.
``This is a monumentally important step forward,'' Spitzer said at the press conference. ``The essential fact is that there is now $2 billion net present value available for construction.''
The seven insurers in the settlement are Travelers Cos., Zurich American Insurance Co., Swiss Reinsurance Co., Employers Insurance Company of Wausau, Allianz Global Risks U.S. Insurance Co., Industrial Risk Insurers and Royal Indemnity Co., Spitzer said in the statement.
St. Paul, Minnesota-based Travelers is the second-largest U.S. commercial insurer. Swiss Reinsurance, based in Zurich, is the world's biggest reinsurer. Allianz, based in Munich, is Europe's largest insurer.
The accord ``fairly and conclusively resolves all disputes involving Swiss Re's WTC coverage,'' Roger Ferguson Jr., chairman of Swiss Re America Holding Corp., said in a statement. The deal will finance the ``rebirth of lower Manhattan,'' he said.
``Travelers has been absolutely committed to the rebuilding effort at the World Trade Center site and we are pleased that the remaining questions have been resolved,'' Marlene Ibsen, a spokeswoman for the company.
Though the settlement is close to the maximum potential payout, ``for us the benefit lies in the fact that we have certainty now,'' said Andreas Shell, Allianz claims crisis coordinator, in an interview. ``We are able to conclude something that has been going on for over five and a half years, which puts a strain on an organization.''
`No Precedent Set'
Shell said he wasn't worried that the case had set a precedent for policyholders to receive more insurance than they paid for. The trade center attacks were ``a very unique experience,'' he said. ``There is no precedent set.''
The insurer was responsible for two policies totaling $433 million.
Keith Owens, a spokesman for Zurich, which paid a total of $95.3 million in connection with the case, said in a written statement that ``it always has been our position that we would pay every dollar owed under our contracts.''
Spitzer compared the insurance dispute to a Stanley Cup playoff hockey series in which the two sides play a ``very hard match'' and ``at the end of the series they always shake hands and move on.''
Silverstein, 75, had been seeking $7 billion from the insurers, double the limit of his policy, arguing that the two hijacked planes that crashed into the twin towers represented two attacks instead of one.
In 2004, two federal juries said Silverstein was entitled to a maximum of $4.68 billion in insurance payments, said Andrew Mais, a state Insurance department spokesman. The settlement means Silverstein's insurers are obligated to pay 97.2 percent of that maximum, he said.
In separate trials, federal juries found in 2004 that 10 of his insurers, including Swiss Re and a Lloyds of London syndicate, owed Silverstein only one payment, based on restrictive language in preliminary contracts they signed. Nine more insurers who had agreed to more vague policy language, including St. Paul Travelers, were found to owe double their policy limits.
In most cases, the contracts were preliminary because Silverstein had leased the trade center from the Port Authority just six weeks before the attacks and negotiations were still ongoing.
The federal litigation had continued for almost two more years as the two sides deliberated over the value of the 10-million square-foot office complex at the time of its destruction. The insurers who settled today had reserved the right to appeal the earlier jury decisions. The settlement will end all litigation on the issue, Spitzer said.
In a separate lawsuit in state court, Silverstein and the Port Authority last year sued Allianz AG and six insurers to force them to make payments directly to the bistate agency. That case arose after Silverstein ceded control of the Freedom Tower, the centerpiece of Ground Zero redevelopment, to the authority, in return for reduced rent payments.
Allianz and the other companies wanted the court to determine whether they were obligated to pay the authority, since their contracts were with Silverstein.
Silverstein remains in control of three other skyscrapers planned for the site, with 6.2 million square feet of space.
The settlement will help assure that the project is completed on time, Silverstein said. The Freedom Tower will be done in 2001, as will Three and Four World Trade Center, with Two World Trade Center completed the following year, he said.
``The train is now moving on down the track,'' Silverstein said. ``The World Trade Center is on its way to being rebuilt.''
The federal case was SR International Business Insurance Co. Ltd. v World Trade Center Properties LLC et al, 01-CIV-9291.
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