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Member, Beacon International Group, Ltd.
NEW YORK--The World Trade Center's leaseholder can recover from a group of insurers only the cost of rebuilding the Twin Towers as they stood before the Sept. 11, 2001, terrorist attacks--not the costs for any improvements to the buildings--under a New York federal court ruling handed down last week.
The latest decision ends one of several ongoing disputes between Silverstein Properties Inc. and some of its insurers. At issue was whether policies issued by six insurers would provide coverage on a so-called "replacement cost" basis or an "actual cash value" basis, which measures the value of the property as it existed prior to the loss and takes depreciation into account.
The insurers--Allianz Global Risks US Insurance Co., Gulf Insurance Co., Industrial Risk Insurers, Royal Indemnity Co., Travelers Indemnity Co. and Zurich American Insurance Co.--argued that they should not be liable for extra expenses related to the rebuilding effort, additional costs Silverstein and related policyholders put at about $700 million. The policyholders hold that the changes are necessary to "adapt the structures' design to the changed legal, physical, and political environment of post 9/11-New York," court papers say.
Siding with the insurers, U.S. District Court Judge Harold Baer wrote in his opinion that policyholders' replacement cost recovery would have to be limited to the costs for rebuilding the towers as they existed on the day of the attacks. "The provisions unambiguously establish that the most the insureds can recover on a replacement cost basis is the amount it would cost to reproduce the WTC beam-for-beam, pane-for-pane, as it stood early on the morning" of Sept. 11, he wrote.
Silverstein currently stands to collect approximately $4.6 billion from all of its property insurers under a federal appeals court ruling last month; the leaseholder had sought about $7 billion.