Best’s News & Research Service - October 21, 2010 03:49 PM (EDT)
WTC's Silverstein Fights $1.2 Billion Settlement in Sept. 11 Property Damage Case
NEW YORK //BestWire// - Attorneys for World Trade Center developer Larry Silverstein are challenging a $1.2 billion settlement in a Sept. 11 property damages case involving dozens of insurers over concern that it could exhaust coverage limits before his own company's related claims are addressed.
U.S. District Judge Alvin K. Hellerstein approved a settlement in July that would resolve $6.5 billion in combined claims pending in 18 related lawsuits that insurers and others have pursued against a group of "aviation defendants" led by American Airlines and United Airlines.
The developer's company, Silverstein Properties, is a key plaintiff in the overall litigation, which seeks to assign liability for the business and property damage losses that stemmed from the Sept. 11 terrorist attacks on the World Trade Center. The case hinges on allegations that lax security measures among both airline and security companies factored into the attacks that caused business-related and property damage losses.
Among the insurers pursuing claims are more than a dozen Lloyd's syndicates, Allianz and several of its subsidiaries, Axa and several of its subsidiaries, QBE International Insurance Ltd., Great Lakes Reinsurance plc and Industrial Risk Insurers.
The judge ruled in August 2009 that insurers who paid billions in claims for Sept. 11 could make subrogation claims against entities they considered liable for damage (BestWire, Aug. 21, 2009).
A mediator in February established the $1.2 billion settlement price in the property damages master case, discounting it sharply after deciding that contention and disagreement among the "scores of insurers" would prohibit a negotiated settlement. The allocation of the settlement proceeds and the defendants' available coverage limits have been sealed under court order jointly requested by those involved.
Silverstein's attorneys want to appeal Hellerstein's settlement order and simultaneously pursue their damages claim at trial.
Richard A. Clifford, liaison counsel for a collective group identified as the settling plaintiffs, refuted the legal notion that there is a limited fund of available insurance proceeds, or that Silverstein's ability to recover on claims was in jeopardy. Clifford contends the remaining World Trade Center plaintiffs in the property damages case, comprised of Silverstein-owned companies, have "already been made whole by the nearly $5 billion in it received from its insurers."
Silverstein's attorneys have identified $8.8 billion in damages, according to court records. A breakdown filed by Clifford includes $12.3 billion for the World Trade Center complex, less $4.1 billion in insurance proceeds already received. The claims for World Trade Center 7 total $1.4 billion, but $800 million in insurance proceeds have been paid out.
Yet Clifford said the $8.8 billion replacement cost claim is unrealistically inflated because Tower 1's redevelopment project is being led by the Port Authority.
Silverstein's attorneys lost a bid to have their trial joined with the sole remaining wrongful death action being pursued against the aviation defendants by the family of the late Mark Bavis, a passenger on United Airlines Flight 175.
Hellerstein on Oct. 20 set a June 13, 2011 trial date in the Bavis case. Bavis' family has pursued a trial to have its negligence claims determined in open court. Federal law passed in the wake of Sept. 11 limited the liability of airlines to the amount of insurance carried, a mechanism designed to prevent a financial collapse of those affected airlines.
Silverstein's attorneys maintain that federal law has limited the recoverable amount, and requested that Hellerstein "prevent any settlement until all the claims are finalized," according to court records. His attorneys have also claimed that settlement process was shrouded in secrecy and there was collusion between insurers with interests on both sides of the negotiating table. But Hellerstein said in a legal filing that the evidence contradicts that claim.
In a Sept. 17 letter to the judge, Silverstein attorney Richard A. Williamson suggested that a shortage of available funds may result in just 4.4 million square feet of office space being rebuilt at the site, slightly less than half of what was destroyed at that location on Sept. 11.
Williamson said in the meantime "billions of dollars in insurance money" remains in the pockets of insurers of the airline companies, security companies, Boeing, and others who ignored government warnings about terrorist threats.
Silverstein Properties, the leaseholder for WTC Towers 2, 3 and 4, reached a development agreement with the Port Authority of New York & New Jersey in August that will guide future development at the site.
Construction of Tower 4 is expected to be completed by 2013. Insurance proceeds comprise approximately $450 million of that $1.86 billion project; the balance will be funded with Liberty Bonds. Tower 3 is being rebuilt to street level with insurance proceeds, but private market support, including the need for $300 million in equity, could trigger additional public funding.
(By Al Slavin, senior associate editor, BestWeek)