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Three World Trade Center insurers have won a ruling that the Sept. 11 terrorist attack that destroyed the twin towers was one occurrence, not two. U.S. District Judge John S. Martin of the Southern District of New York ruled Wednesday in SR International Business Insurance Co. v. World Trade Center Properties LLC, 01 Civ. 9291 (JSM) that language in insurance binders issued by Hartford Fire Insurance Co., St. Paul Fire and Marine Insurance Co., and Royal Indemnity Co. makes clear that the attack by two hijacked airplanes should be construed as a single event as defined by those particular policies. The three companies are among 22 insurers fighting a highly public court battle against World Trade Center leaseholder Silverstein Properties, which is claiming that the destruction of the buildings entitles it to collect $7.1 billion, or $3.6 billion on each of two separate occurrences. The dispute centers on which of two insurance forms was in force on Sept. 11, 2001. The parties to the lease had finalized an extremely complex deal just a few months before the attack, and most if not all of the insurers for the complex had yet to issue final policies. The insurers, led by Swiss Reinsurance Co., contend that the Wilprop form, so-called for Willis Ltd., Silverstein’s insurance broker, applies. The Wilprop language defines “occurrence” as damages attributable to one cause or one series of similar causes, which the insurers argue would encompass the terrorist attack. The court agreed, finding that “the ordinary businessman would have no doubt that when two hijacked planes hit the Twin Towers in a 16 minute period, the total destruction of the World Trade Center resulted from one series of similar causes.” However, Silverstein and its lawyers have taken the contrary view that the Wilprop form does not govern the arrangement. They have argued that the policy in force was one written by Citigroup subsidiary Travelers Insurance Co. that does not define “occurrence.” It is customary in large placements like the World Trade Center, they said, for one carrier to serve as the lead underwriter and for the other carriers to agree to follow whatever form it determines. In his ruling, Martin rejected Silverstein’s position. Instead, as insurance experts predicted, he took a case-by-case approach. “It’s not a great surprise that different insurance companies are being treated differently here,” said Jeannine Chanes, a New York insurance lawyer, who is not involved in this case. “In an ideal world, a large commercial insurance program would have policies with consistent terms,” she said. “But that is something that, frankly, I have never seen.” The judge appeared to agree that this certainly was the case with the Silverstein insurance program. “What the court must do is examine the facts with respect to the negotiations between the brokers for the Silverstein parties and each of these insurers,” Judge Martin wrote. He then examined the circumstances of the three insurers moving for partial summary judgment. In each instance, he found that the Wilprop form governed. Lawyers for the insurers said that although Martin did not rule that the Wilprop form necessarily applies in all cases, going forward, the decision will help them. “It confirms that Willis went to market with the Wilprop form and that the intent of the program was for the Wilprop definition of occurrence to govern,” said Michael Barr, a partner at Sonnenschein Nath & Rosenthal who represents Royal, one of the three insurers moving for partial summary judgment. “There are now five insurers that have been either adjudicated to have, or Silverstein has agreed to have, the Wilprop form,” added Barry Ostrager, a partner at Simpson Thacher & Bartlett who represents Swiss Reinsurance Ltd., the insurer with the largest exposure in the case. In addition to Royal, Hartford and St. Paul, two other insurers, Ace Bermuda Insurance Ltd., a subsidiary of Ace Ltd., and XL Insurance (Bermuda) Ltd., a unit of XL Capital Ltd., have settled with Silverstein on the basis of one policy limit. “Silverstein now has the impossible burden of proving that it had traded Traveler’s form [which was issued later] with the Wilprop form [issued earlier to the other insurers],” Ostrager said. APPEAL TO BE CONSIDERED Silverstein spokesman Gerald McKelvey said in a statement that Silverstein would consider appealing the decision “at the appropriate time.” He also downplayed the importance of the ruling, noting that the three insurers are responsible for only $112 million of coverage, compared with the “$6.7 billion to be recovered in the litigation.” Patrick Hofer of Hogan & Hartson represented Hartford, and Lon Berk of Shaw Pittman represented St. Paul. Herbert M. Wachtell of Wachtell, Lipton, Rosen & Katz, represented Silverstein.

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