Judge caps insurance payout for 9/11 WTC attack
Judge Harold Baer of the U.S. district court in Manhattan accepted the insurers’ arguments the three “replacement cost” policies capped payouts at what it would cost to rebuild the site precisely as it existed prior to September 11, 2001.
He rejected arguments by developer Silverstein Properties Inc. that it should recover the additional $700 million to make a rebuilt complex safe, modern and politically acceptable.
“Insurance against technological change and shifts in the political winds may very well exist in the marketplace,” Baer wrote in his 26-page decision. “But no court has ever found that such coverage is included in a replacement-cost policy.”
The judge said the policy entitled the insureds to new buildings, not new and improved buildings.
Among the insurers were affiliates of Allianz AG Holding, St. Paul Travelers Cos. Inc., Swiss Re and Zurich Financial Services AG.
“This is a big loss in dollar terms for Silverstein,” said Tom Baker, director of the Insurance Law Center at the University of Connecticut School of Law. “It will certainly be appealed.”
Bud Perrone, a spokesman for Silverstein Properties, said in a statement: “Today’s ruling will not affect the total amount of insurance available to rebuild the World Trade Center, or negatively impact the timetable for construction.”
Silverstein signed a 99-year lease on the World Trade Center site from the Port Authority of New York and New Jersey six weeks before the attacks.
Baer said it “stretches credulity” to suggest the insurers would agree to the $700 million payout without saying so explicitly.
The judge also said it would be difficult to determine an appropriate payout given that Silverstein is not rebuilding the Twin Towers as they existed.
“The insurers should be generally pleased with the decision,” said Barry Ostrager, a partner at Simpson Thacher & Bartlett LLP, who represents Swiss Re affiliate Industrial Risk Insurers. “What’s most noteworthy is that Judge Baer interpreted the policy language as the insurers thought it was written.”
Reconstruction has been delayed by litigation, as well as emotional and design concerns over what the site should look like and represent.
The current, $11 billion reconstruction plan anticipates the building of four skyscrapers, including a 1,776-foot (541-meter) Freedom Tower open to tenants by 2012.