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One of many insurance companies locked in a dispute with World Trade Center leaseholder Larry Silverstein has the right to an independent appraisal of the loss incurred in the Sept. 11 attacks, Southern District of New York Judge John S. Martin has ruled. Pursuant to its contract with Silverstein, Allianz Insurance Co. had sought to have disinterested appraisers selected by both sides, with any discrepancy to be resolved by an umpire. Silverstein has opposed the motion, arguing that the appraisal mechanism in the insurance agreements was pre-empted by the Air Transportation and System Stabilization Act, which granted exclusive jurisdiction to the Southern District of New York for claims flowing from the Sept. 11 jet crashes. But Judge Martin agreed with Allianz, saying that “at the outset it should be noted that to construe the grant of jurisdiction to deny Allianz a contractual right that it has under New York law would raise serious constitutional issues. “But even if there were no constitutional issue presented, there is no basis for finding that when Congress conferred jurisdiction on this Court for all actions relating to the events of Sept. 11, it meant to deprive parties of their contractual right to appraisal or arbitration,” he said. “Indeed, there is a serious question whether the grant of jurisdiction in the Act applies to this case.” Meanwhile, at a court hearing Tuesday, Martin expressed skepticism about keeping an upcoming Nov. 4 trial date in the case, because discovery is far from complete. (No decision was made on whether to push back the trial date, but another hearing will be held today.) In his ruling on the appraisal, Martin said the original purpose of the Air Transportation and System Stabilization Act, passed in the wake of the tragedy last September, was to “limit the liability of the airlines … and to provide an alternative method of compensating the victims of the attacks.” But there is nothing in the legislative history of the act, nor in the provision vesting exclusive jurisdiction in the Southern District, he said, that indicates Congress intended to affect parties with a property interest in the World Trade Center and their insurance companies. The decision in Allianz Insurance Co. v. World Trade Center Properties, 02 Civ. 0017, was the latest in a series of rulings in the multibillion-dollar fight over insurance payments for the World Trade Center attacks. Travelers Indemnity Co. and a host of other insurers contend that New York law requires the two terror attacks on the World Trade Center be considered a single occurrence for insurance purposes. Silverstein argues the attacks were two occurrences, and he is entitled to double the insurance proceeds: roughly $7.1 billion for reconstruction and lost revenues. Last month, Martin urged the parties to consider settling the case, and asked fellow Southern District Judge Lewis A. Kaplan to oversee settlement talks. JURY PREFERRED BY SOME In his opinion on the Allianz motion, Martin noted that some other insurers have indicated they might seek an appraisal, but others have told the court they preferred to have a jury decide the issue. Silverstein had argued that Allianz was both too late in asserting its appraisal rights, because it had already engaged in litigation, and too early, because both parties are required to first hire experts and evaluate the loss and then engage in good-faith negotiations before invoking the appraisal process. On the claim that Allianz was too late, Judge Martin said Allianz specifically “reserved its right to demand appraisal in its reply to the Silverstein Parties’ counterclaim” and spent a lot of time trying to negotiate an agreement on the appraisal process before it filed the motion. On Silverstein’s claim that Allianz sought appraisal too early, Martin said, “It makes no sense to suggest that the parties must bear the expense of hiring experts to evaluate a loss before they retain the services of an ‘impartial appraiser.’” The judge did express one concern he said “might militate against the full enforcement of the appraisal provision.” With only some insurers seeking appraisal, he said, enforcement of those rights “may unfairly multiply the proceedings in which the Silverstein Parties are forced to litigate the valuation issue.” One remedy, he said, might be to substitute himself for the neutral umpire if the appraisers cannot agree. But for the time being, the judge said he was reserving decision on whether the parties would choose the umpire. Silverstein was represented by Herbert M. Wachtell of New York-based Wachtell, Lipton, Rosen & Katz. Allianz was represented by John B. Massopust of Zelle, Hofmann, Voelbel, Mason & Gette.

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