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The defeat suffered by World Trade Center leaseholder Larry Silverstein in a federal appeals court places his bid to collect almost $7 billion in insurance money for the destruction of the twin towers squarely in the hands of a jury. Insurance company lawyers were exultant on Friday following the decision by the 2nd U.S. Cicruit Court of Appeals, saying the ruling does more than just squelch Silverstein’s bid for a determination that the Sept. 11, 2001, terror attacks were two “occurrences” as a matter of law. They say the ruling clears the way for almost 20 insurance companies to put before a jury damaging evidence that employees for Silverstein’s insurance broker, Willis Group Holdings, believed the attacks were one occurrence. The circuit upheld the denial of Silverstein’s summary judgment motion by Southern District of New York Judge John S. Martin, who found that the parties’ use of the term “occurrence” was ambiguous and, therefore, extrinsic evidence must be heard to determine their intent on coverage still being negotiated when the towers fell. Silverstein had hoped that Martin, and then the 2nd Circuit, would find a fixed definition of “occurrence” under New York law, thus obviating the need for a jury trial, and allowing him to double the roughly $3.5 billion value placed on the policies by the insurers. But now the issue will go to trial before Southern District Chief Judge Michael B. Mukasey, who was assigned the matter after Martin announced this summer he was leaving the federal bench. Harvey Kurzweil of Dewey Ballantine, who represents Travelers Indemnity Co., said the decision “literally vindicated every position we took.” Kurzweil said the “absolute best evidence” in his favor is a note sent by one Willis employee in New York to the Willis’ London office just after the terror attacks “in which they recognized that this was going to be viewed as a single occurrence.” While that ruling on the Travelers issue was a victory for the bulk of the insurance carriers in the lawsuit, Kurzweil and other attorneys for the carriers say a second ruling in the court’s opinion also bodes well for their side. The circuit also upheld Martin’s grant of summary judgment for three insurance carriers who were indisputably governed by the “Wilprop” form outlining property coverage issued by Willis in the months leading up to the attacks. Martin had ruled that the clear meaning of the term “occurrence” in the Wilprop forms concerning Hartford Fire Insurance Co., Royal Indemnity Co. and St. Paul Fire & Marine Insurance Co., rendered the attacks a single event. So even though those three carriers represent only 3 percent of the total coverage at issue, Willis’ understanding of the definition of “occurrence” becomes a favorable piece of evidence for the jury, attorneys for the insurance companies argue. Those lawyers are also confident there is additional evidence showing many of the remaining carriers were also bound by the Wilprop form, including one carrier with a major stake in the litigation: Swiss Re International Business Insurance Co. SILVERSTEIN’S EVIDENCE But attorneys for Silverstein say they have good evidence that several of the carriers knew they were on the hook for two occurrences, including that they were told that negotiations with Travelers, the putative lead insurer, were ongoing. Silverstein’s lead attorney, Herbert M. Wachtell of Wachtell, Lipton, Rosen & Katz, could not be reached for comment. Silverstein released a statement through his publicist emphasizing that “the 2nd Circuit did not rule on the question of what policy form governed the coverage of any other insurer of the complex.” Silverstein spokesman Howard Rubenstein said, “The jury won’t be fooled when faced with evidence that one of the insurers argued to be paid twice from its reinsurance carriers, but only wants to pay one-half what it owes to Silverstein.” Rubenstein also noted that unlike the three carriers responsible for 3 percent of the coverage, Swiss Re and another major carrier were provided with copies of the Travelers form before they “agreed to participate in the coverage.” In the first ruling, the circuit court dealt with the victory handed Travelers and other carriers by Martin on the Silverstein parties’ motion for summary judgment. The circuit agreed with the lower court that the term “occurrence” in the Travelers’ binder, defined as a “temporary policy for the convenience of all parties that controls until the execution of a formal policy,” was ambiguous. And it rejected as “erroneous” the Silverstein argument that the term has “a uniform meaning” under New York law. With the definition unsettled, the circuit said, it is up to a jury to decide what the parties intended the term to mean as policy negotiations evolved. A jury “could reasonably conclude that the ‘event’ that triggers coverage is the Covered Cause of Loss, rather than the damage itself,” Chief Judge John M. Walker Jr. said for the circuit court. “It could also find that the cause of destruction of the WTC was either the individual impacts caused by each plane or a single coordinated terrorist attack.” Nearly all of the cases Silverstein cited in support of its definition of “occurrence,” Walker said, were third-party liability cases, which “involve different issues, both public and private, than first-party property insurance cases.” One important difference, he said, was that, in third-party cases, “there is no reason to look any further back in the chain of causation than to the insured’s acts of negligence, because it is the insured’s negligence that triggers liability.” By contrast, in first-party liability cases such as the World Trade Center dispute, Walker said “the insured’s negligence is not at issue.” “As a result of these differences, a court’s construction of the undefined term ‘occurrence,’ or the synonymous term ‘accident,’ as intended by the parties for use in the third-party context is not necessarily applicable in the context of first-party property insurance,” he said. “In any event, we are not called upon here to decide whether there was one occurrence or two in this case, only whether the district court properly concluded that because there is no well settled definition of the term ‘occurrence’ under New York law, the Travelers binder was sufficiently ambiguous to preclude summary judgment and to permit the factfinder to consider extrinsic evidence of the parties intent,” Walker said. CASE ON POINT The case that was most on point, he said, is the 2nd Circuit’s decision in the first-party property insurance dispute of Newmont Mines Ltd. V. Hanover Ins. Co., 784 F.2d 127 (2d Cir. 1986), where the circuit said New York courts “rejected any single definition of occurrence.” Newmont Mines concerned the collapse of two separate parts of a roof, several days apart, triggered by heavy snowfall. A jury found that there were two partial losses and two occurrences, and the circuit upheld the jury instruction given on the definition of “occurrence.” Walker said that contrary to the Silverstein arguments, “the one thing Newmont Mines makes certain is that the question of how many occurrences the events of September 11 constituted is a question properly left to the fact-finder.” “To be sure, a jury could find two occurrences in this case, as it did in Newmont Mines, or it could find that the terrorist attack, although manifested in two separate airplane crashes, was a single, continuous, planned event causing a continuum of damage that resulted in the total destruction of the WTC, and, thus, was a single occurrence,” he said. Barry R. Ostrager of Simpson Thacher & Bartlett, who represents Swiss Re called it a “banner day” in that the circuit recognized that Silverstein “wanted a broad definition of ‘occurrence’ in the Wilprop form because it would lower his deductible.” Michael H. Barr of Sonnenschein Nath & Rosenthal, who represented Royal Indemnity, is still in the case because the company is being pursued for $125 million in another policy that was not indisputably a part of the Wilprop form. “This is a sweet victory,” Barr said. “We thought the facts were clear. Judge Martin said so, and the 2nd Circuit labeled their arguments frivolous. This is a victory for common sense and the plain meaning of words.” Judges Jose Cabranes and Rosemary Pooler joined in the decision. The cases are World Trade Center Properties v. Hartford Fire Insurance Co. and World Trade Center Properties v. The Travelers Indemnity Co. The lead docket number is 02-979.

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