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Lessons to learn from WTC claims litigation


THE RECENT SETTLEMENT of the protracted coverage dispute arising from the destruction of the World Trade Center has been a long time coming. We have another word for the delay: disgraceful.

Resolving the multibillion-dollar dispute should not have taken nearly six years since the terrorist attacks on Sept. 11, 2001. Coverage disputes are going to happen when parties differ on interpretation of terms, but ambiguity over the World Trade Center's program was brought on by the industry itself.

Why was the WTC property coverage bound July 18, 2001, but no policy issued nearly two months later, when the hijacked planes hit the towers? Moreover, why were two differing forms—one defining a single occurrence and the other lacking any occurrence definition—used to syndicate the risk to two dozen insurers?

At the heart of Silverstein Properties Inc.'s dispute with its property insurers over the $3.55 billion in limits was what would seem to be a simple question: Was the terrorist attack involving two planes a single occurrence or two? Relying on the wording in the binders, courts held that nine of the two dozen insurers bound on one form were liable for two occurrences, while the others were liable for only a single occurrence.

Certainty is one of the most valuable benefits of insurance, but if terms and conditions are not known at the time coverage is bound, certainty has not really been achieved. The Sept. 11 attacks were a horrific example of why contract certainty is important. Had final coverage wordings been delivered even a week before that fateful day, it's unlikely that one of the largest-ever property claims would have taken six years to settle.

If for no other reason than to honor the memories of the nearly 3,000 individuals who perished on that day, we urge the insurance industry to learn from this and improve.