Quote of the Day - A billion here, a billion there, and pretty soon you're talking about real money.
The U.S. Court of Appeals for the Second Circuit ruled that the loss of the towers constituted one occurrence. In a heavily factual opinion, the Court cited the policy form developed by Silverstein's insurance brokers, Willis of New York. The Willis "form" defined "occurrence" as:
"... losses or damages that are attributable directly or indirectly to one cause or to one series of similar causes." Apparently, Silverstein was concerned with the insurance companies attempting to apply multiple deductibles to one "occurrence." Silverstein instructed Willis to customize (or manuscript) this language into the policies with the insurers.
Silverstein, along with the rest of us, never thought both towers would be lost in one accident. Silverstein wanted high deductibles to keep premiums low, but didn't want the carriers to avoid paying claims by applying multiple "occurrences" to each loss.
It backfired. In a big way.
To the tune of only $3.5 billion instead of $7 billion. Yes, that's with only one "B" instead of two.
In their decision, the Second Circuit agreed with Judge John S. Martin of the U.S. District Court for the Southern District of New York. He ruled that the "occurrence" definition agreed to by most of the various insurers meant that the damage occurred from one cause - a coordinated plan of attack on the two WTC towers. The Second Circuit affirmed his ruling.
Traveler's portion of the case, however, remains unresolved, and is set to be heard by a jury. The Second Circuit thought the definition in the Travelers policy was too ambiguous to grant Summary Judgment as a matter of law for Judge Martin to decide.
The case is actually much more complicated that I've presented here, and for lawyers, insurance brokers or others interested in the facts behind what happened, the case gives all the details, even down to quoting faxes and deposition testimony. Otherwise, the opinion is good for bedtime reading.
The case is also a Civil Procedure professor's dream come true. The Court's discussion of jurisdiction goes on for almost eight pages - a lot to slog through if you're not a lawyer.
If Silverstein hadn't tried to limit its own payout for multiple deductibles by altering the typical insurance definition of "occurrence," the Court would have had no problem awarding $7 billion dollars of coverage.
You know: two planes, two towers, two different times, two sets of highjackers.
Too bad for almost everyone ... but hope springs eternal for Silverstein and Travelers.