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NEW YORK--Nearly six years of legal wrangling over the World Trade Center insurance claim ended last week with seven insurers agreeing to pay $2 billion to WTC leaseholder Silverstein Properties Inc.
The $2 billion settlement--which is on top of $2.55 billion already paid by various insurers--resolves all outstanding claims for the buildings destroyed in the Sept. 11, 2001, attacks.
It also clears the way for the redevelopment of Ground Zero, which was frozen amid court battles.
A key sticking point in the protracted dispute revolved around WTC leaseholder Larry A. Silverstein's argument that the destruction of the Twin Towers was caused by two aircraft, and therefore the loss constituted separate occurrences under his coverage. He argued that the two dozen property insurers on the program were obligated to pay two policy limits of $3.55 billion each.
Complicating matters was the unfinished state of the insurance program. Mr. Silverstein became the leaseholder in July 2001. At the time of the attacks, coverage had been bound but policy wordings were not yet finalized.
The seven insurers that agreed last week to the global settlement are: Allianz Global Risks U.S. Insurance Co.; Employers Insurance Co. of Wausau; Industrial Risk Insurers, now owned by Swiss Reinsurance Co.; Royal Indemnity Co.; Swiss Re; Travelers Cos. Inc.; and Zurich American Insurance Co.
Under terms of the agreement, all companies involved will keep confidential the individual amounts owed to Silverstein properties as part of the $2 billion sum.
Mr. Silverstein originally sought about $7 billion from his property insurers, but a series of court rulings determined that Silverstein stood to collect a maximum of $4.68 billion from insurers.
Last week's settlement brings Mr. Silverstein's total recovery to about $4.55 billion--or 97.2% of the total maximum recovery.
Negotiations towards the WTC settlement began March 22, through a mediation process overseen by retired New York Court of Appeals Judge Albert Rosenblatt.
The talks were convened "to resolve an impasse of litigation that seemed to continue to grow and grow," said New York Insurance Superintendent Eric Dinallo during a news conference last week held at the insurance department's Manhattan offices.
"The predictions were that there were at least two more years of appeals and other related litigation on the horizon," Mr. Dinallo said. "This issue had to come to an end. It was an obstruction that was clearly hurting the redevelopment and the public's confidence in the insurance industry."
New York Gov. Eliot Spitzer compared the settlement to "two hockey teams who have just finished a very hard match."
"There have been rough moments, there have been battles, there have been disagreements, because the sums involved are enormous," Mr. Spitzer said.
The settlement is "a monumentally important step forward" toward redeveloping the World Trade Center site, he said. "It permits us to move forward with certainty. It permits access to the capital markets. It resolves and eliminates one of the outstanding hurdles that had remained, and it brings to closure years of litigation," said Mr. Spitzer at the news conference, which was attended by various New York officials and insurance company representatives, including Pierre L. Ozendo, chief executive officer, Americas, Swiss Re; Andreas Shell, claims crisis coordinator for Allianz Group; and Kenneth F. Spence, executive vp and general counsel for Travelers.
"This train is now moving down the tracks. The World Trade Center is on its way to being rebuilt," Mr. Silverstein said.
The settling insurance companies hailed the resolution of the dispute.
"Travelers has been absolutely committed to the rebuilding effort at the World Trade Center site, and we are pleased the remaining questions have been resolved," Travelers said in a statement.
The settlement has sparked some backlash, however.
Following the last week's announcement, French reinsurer SCOR S.A.--one of Allianz's reinsurers on the WTC policy--said it would challenge Allianz's entry into the insurance settlement and would seek arbitration.
In a statement, SCOR said it "considers that the Allianz settlement agreement does not respect the terms and conditions of the Certificate of Reinsurance between SCOR and Allianz."
"SCOR has already informed Allianz that this settlement exceeds the contractual requirements and contains ex gratia elements. Under the terms of the clause set out in the Certificate of Reinsurance, SCOR has requested that this case be referred to arbitration," SCOR said.
Insurers have already reserved funds for their WTC losses, so material impacts on 2007 earnings are not expected as a result of the settlement, insurers and experts said.
"The dollar amounts involved were within range of what insurers expected based on the original court decisions in 2004," said Robert P. Hartwig, president and chief economist of the Insurance Information Institute.