9/11 and Insurance Law IV
Prof. Bill Long 1/23/06
More Issues to Spot and Know
2. A Piece of Allied Litigation. Shortly after SR Reinsurance, which was on the hook for $877.5 million in coverage (22% of the insurance for the Silverstein properties), brought the DEC action, Silverstein, through WTC Properties, brought an action against two London insurers (ACE Bermuda and XL Insurance, Ltd.) regarding venue for arbitration or litigation. Each of the London insurers had a provision in their policies which would compel arbitration of insurance claims in London. However, the US Congress had passed a statute on Sept. 22, 2001 (The Air Transportation Safety and Sytem Stabiliization Act) which would have required all claims growing out of the 9/11 attack to be adjudicated in the federal courts of the SD of NY. Thus, Silverstsein argued that venue should be in NY. You might think that the insurers had a good argument (regarding the inviolability of contract), but in the supercharged context after 9/11 insurers were leery of asserting too many of their "rights." This case was settled in Feb. 2002, with the insurers paying only for one "occurrence." The payments totaled $365 million--$298 million for ACE and $67 for XL. Thus, two of the 24 insurers were out of the picture.
3. The DEC action. This action was brought by SR in October 2001 and required that the court declare the rights and responsibilities of all insurance companies. Three of the insurance companies (Hartford, Royal Indemnity, and St. Paul Fire) moved for summary judgment, declaring that the language of the WilProp form on occurrences covered their situation. The Court agreed. It held that the occurrence language of the WilProp form was not ambiguous, and that the events of 9/11 were one occurrence as a matter of law, as occurrence was defined in the WilProp form. The Court also held that the three insurers were under the WilProp and not the Travelers policy form.
4. The Second Circuit Speaks. This decision, from late Sept. 2003, affirmed the District Court's grant of summary judgment for the three insurers, and then did one other thing. With respect to the three insurers, they then were also out of the case, with a combined liability of $112 million. Thus, 19 insurers were left, with just a bit over $3 billion in insurance coverage at stake. Silverstein wanted $6 billion of course, but we will have to see what happened. In addition, as indicated, the Circuit Court dealt with a motion by Silverstein to declare that the Travelers use of "occurrence" (without definition) meant, as a matter of law, that the WTC attacks would be two occurrences. The court disagreed with Silverstein and concluded that it was a jury question to determine whether the events of 9/11 were one or two occurrences for insurance purposes. This decision, then, opened the door for the jury trials of 2004.
5. The First Jury Trial. We have 19 insurers left, with the minimum of $3 billion and maximum of $6 billion on the table. The first trial included 13 defendant insurance companies. I don't know the reason why the court divided the trial into two trials. Since liability for one occurrence was found in the first and liability for two occurrences in the second, it may have had something to do with the way the various defendant insurance companies adopted the Travelers policy as their own. Thus, as is usual in jury trials, matters would be highly fact-intensive. In addition, there were loads of discovery battles which the court had to solve during the second half of 2003. This trial was held between Feb-April 2004 under a different judge than had handled the first phases of the issue (the first judge, Martin, had retired in the mean time). When the jury returned its verdict, it held that 10 of the insurers, whose liability was for $1.9 billion, would only be required to pay $1.9 billion. In other words, the jury decided that these 10 companies were under the WilProp form or that the definition of occurrence in the form they used would include attacks on both towers as one occurrence.* The liability of the various carriers was as follows:
[*There is one insurance company I haven't been able to account for. I will list its name below and hope that someone can clarify its situation.]
1. $877.5 million--SR Business Insurance Co, Ltd.
2. $ 4 million--Copenhagen Reinsurance Co.
3. $ 64.9 million--Employers Insurance of Wausau.
4. $254.3 million--Federal Insurance Co (Chubb).
5. $ 38 million--Great Lakes Reinsurance PLC.
6. $ 2.4 million--Houston Casualty Co.
7. $ 5 million--Lexington Insurance Co.
8. $678.5--Lloyd's group.
9. $ 12.5 QBE International.
Was there a 10th? If so, it would be Wurtemburgerische Versicherung AG. Note: There were three insurance companies at the first trial which the jury concluded were obligated to pay double. These then became defendants at the second trial. They were Royal Specialty Underwriting, Inc; Zurich American Inurance Co and Twin Cities Fire Insurance Co. The total liability of these three was $178 million or, doubled, $356 million.
6. The Second Jury Trial. This took place in Fall 2003, leading to a verdict on December 6, 2004. The jury concluded that the remaining 9 insurers were required to pay double their limits because, under the language of their policies, there were two occurrences on 9/11 and not one occurrence. The total amount at stake here was $1.1 billion or, from Silverstsein's perspective, $2.2 billion. The nine insurers, without their amounts, liable to "pay double" were:
1. Allianz AG Holding of Germany.
2. Industrial Risk Insurers.
3. Travelers Indemnity
4. Royal Specialty Underwriters Insurance.
5. Gulf Insurance Co.
6. TIG Insurance Co.
7. Zurich American Insurance Co.
8. Twin City Fire Insurance Co.
9. Tokio Marine and Fire Insurance Co.
There are many other issues, and I am sure you believe me, but this suffices for now.
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