Best’s News & Research Service - March 23, 2004 02:30 PM (EST)
Silverstein Escapes Contempt Charge in Twin Towers Trial
NEW YORK //BestWire// - Larry Silverstein's day in the spotlight during a grueling federal civil trial over disputed insurance coverage for the World Trade Center ended as well as he could expect-a civil contempt charge against him was tossed out by a judge eager to get a courtroom full of lawyers refocused on the main order of business.
As the trial before Judge Michael B. Mukasey in U.S. District Court for the Southern District of New York entered its seventh week, the judge wrapped up a mini-hearing on the real estate developer's alleged defiance of an order not to comment to the media about the case by saying he didn't buy Silverstein's plea of ignorance. In a sign that he wants to keep the case moving forward, while keeping the dispute from being tried in the media, Mukasey said Silverstein probably could be found in contempt, but such a finding would be counterproductive.
Mukasey concluded that the comments Silverstein made to the media a week earlier about the case didn't prejudice the 12-person jury hearing the case. The judge also said he believes that finding Silverstein in contempt "could have a highly prejudicial effect in this case and in future trials, when and if future phases of this litigation are tried."
As he presented his ruling, Mukasey threw in a not-so-subtle threat that any public-relations antics by any party could be used against the offender. Any party seeking to influence the jury by making public statements could lead the court to "go so far as to permit the jury to consider such an effort as evidence that the party in question believes its case is weak," he said.
Silverstein and his company, Silverstein Properties LLC, which along with Westfield Properties LLC is co-leaseholder on the World Trade Center, are locked in a dispute with a dozen insurers over whether the destruction of the World Trade Center on Sept. 11, 2001, was one event or two for insurance purposes. If the disaster is two events, as Silverstein argues, the leaseholders would get twice the insurance payout-nearly $7 billion, rather than the $3.55 billion the insurers would pay for a single event.
The insurers, led by reinsurer Swiss Re Group, are challenging Silverstein's assertion that the catastrophe was two events. The current trial before Mukasey is to determine what insurance form was used to bind the insurers to the twin towers' property insurance program-a form from broker Willis Group Holdings Ltd. (NYSE:WSH), known as WilProp 2000, or a form introduced by Travelers Property Casualty Insurance Co. (NYSE:TAPa). The Willis form provides a definition of "occurrence" that prior court rulings already established would define the twin towers' destruction as a single occurrence. The form submitted by Travelers less than two months before the Sept. 11 terrorism leaves the definition of occurrence open.
Over the past 2 1/2 years the dispute has, at times, erupted into a public war of words between the two sides. Last October, Silverstein accused the insurers of holding up plans for rebuilding on the World Trade Center site, known as "Ground Zero," by refusing to pay. Swiss Re replied that Silverstein had used much of the insurance payout so far released to fund his legal battle with the insurers (BestWire, Oct. 13, 2003).
Silverstein repeated his charge that the insurers were holding up the rebuilding effort in a March 15 press conference at Ground Zero. An article appeared in the March 16 edition of New York Newsday, quoting Silverstein. That prompted David Boies, an attorney representing London market insurers in the trial, to ask Mukasey to consider contempt-of-court proceedings, since the judge, at the beginning of the trial, had imposed a gag order barring all participants from speaking to the media during the trial (BestWire, March 18, 2004).
Following is part of what Silverstein said at the press conference, as quoted by Mukasey:
"And as you know, we are fighting hard with the insurance companies to achieve the money that is going to be necessary for the rebuilding of downtown...It's an ongoing battle and, as you can understand, they are trying to save the money. We are trying to get them to fulfill the responsibilities that we paid for when we paid the premiums under the policies. Instead of getting insurance, we got ourselves a massive amount of litigation."
Silverstein also said that the rebuilding of the site would cost an estimated $12 billion, $5 billion of which would come from the federal government. The other $7 billion, he said, he is counting on coming from the insurers.
Over the first six weeks of the trial, attorneys for the insurers have grilled witnesses ranging from the risk managers for Silverstein Properties and Westfield Properties, to Willis brokers and executives for the financial institutions that put up loans to the leaseholders of the World Trade Center. Testimony so far establishes a picture of incomplete insurance arrangements on the property, though the insurers involved did bind to coverage by July 19, 2001, the date the 99-year lease was signed between Silverstein, Westfield and the World Trade Center's owner, the Port Authority of New York and New Jersey.
The financial strength of Swiss Re Group is rated A+ (Superior) by A.M. Best Co.
(By David Pilla, senior associate editor, BestWeek: David.Pilla@ambest.com)