September 11: One Occurence or Two - Update 

publication 

Fall 2004 - (Lang Michener InBrief )

Lang Michener InBrief 
Also published in Canadian Insurance Law Reporter, March 2007
In the Spring 2002 issue of In Brief, we discussed the background of Silverstein's plight, having entered into a long-term lease for both World Trade Center Towers two months before the deadly attack of 9/11, and his efforts to argue that the two attacks constituted two separate events for the purpose of insurance coverage (as opposed to one, as his insurers were maintaining). The difference between the two positions was a staggering $3.5 billion (U.S.). 

The jury has now rendered its decision. A victory for some of the insurers and a loss for Silverstein. The important essential facts, which are sadly altogether too common in the world of insurance coverage, are:
  • Silverstein's broker, Willis, using its own form, which it proposed to the insurers, treated the events of 9/11 as one insured event. This is not unusual because, at the time of negotiating coverage, the insurer and its broker have a financial interest in minimizing the amount of coverage that determines premiums and the number of deductibles that might apply.
  • Travelers, one of the insurers, approached for coverage, wanted to use its own form which, in the case of 9/11, would have treated the attacks as two insured events. Again, this is not unusual as property coverage the size of the World Trade Center normally involves negotiations with multiple carriers, each of whom have their own favourite forms and peculiar clauses.
  • While Silverstein's broker sent the Travelers form to the other insurers, the evidence was not clear that the insurers received the revised form, let alone accepted it. Again, in a large lease and other transaction, it is not unusual to try to pull last-minute items such as insurance together for a closing.
  • Coverage was bound on July 18, 2001. Several of the insurers signed a binder containing words "subject to reservations as to final policy language." No final policies had been issued by September 11, 2001. Unfortunately, this again is quite common in the insurance area which, as far as documentation is concerned, seems to be stuck in the languid old days when the pace was much more leisurely.
It is not surprising that once a loss materializes, parties seek to wring out maximum advantage from their positions, especially when such large dollar amounts are involved. A lot, if not all of this, could have been avoided had the parties focused on nailing down the terms of coverage before closing or, at the very least, within a reasonable period thereafter. Can you imagine purchasing a house without having the proper documentation finalized and executed? Silverstein shows that insurance coverage should be no different. 

As a sequel, Silverstein is still pursuing a trial that may involve from seven to 10 insurers who may have accepted the Travelers form of policy or at least for whom it is not quite as clear that they didn't. Accordingly, the saga is not yet complete and we will continue to keep you updated. Stay tuned.

Sarah Topp, who assisted in the preparation of this article, was a summer law student at the Toronto office.