UPDATE: Jury Gives Partial Verdict In WTC Case

By Janet Morrissey
Dow Jones Newswires
Thursday, April 29, 2004

NEW YORK (Dow Jones) -- The jury in the multibillion-dollar World Trade Center insurance case delivered a partial verdict Thursday after telling the judge they had reached a unanimous decision on all insurers except one.

The jury concluded that the majority of insurers in this phase of the trial signed binders based on the WilProp form, which views the terrorist attack as a single event. This deals a blow to World Trade Center leaseholder Larry Silverstein, who has been vying to have the plane attacks on the Twin Towers deemed two events entitling him to two payments.

The jury ruled that the London insurers (which includes about 20 Lloyds syndicates, Great Lakes Reinsurance, and Houston Casualty), QBE International Insurance Ltd., Copenhagen Reinsurance Co., Federal Insurance, Lexington Insurance Co. and Employers Insurance of Wausau all bound their coverage on the World Trade Center based on the WilProp form.

Only three insuers - Zurich American Insurance Co., Royal Indemnity Co. and Twin City Fire Insurance Co. - did not bind on the WilProp form, the jury decided.

The companies that bound on the WilProp form represented about $1.06 billion of the total coverage while the three entities that were not bound represented only about $176 million.

The jury said it could not reach a decision on Swiss Re, which is the insurer with the biggest exposure in the insurance coverage, representing $877.5 million.

"We have focused our efforts on this one insurer for the majority of the last five days with great diligence, and in spite of our best efforts have not been able to reach a unanimous decision," the jury wrote in a note.

The judge ordered the jury to resume deliberations on Swiss Re. He said that a great deal of "time, effort and expense" by both the insureds and insurers had been spent on this case. He said there's no guarantee that another trial and jury will have a better chance of reaching a verdict.

After the jury left the courtroom, Swiss Re lawyer Barry Ostrager requested a mistrial because he didn't want to accept a partial verdict in the case. The judge denied his request.

At the end of the day, Judge Michael Mukasey told the court that juror number 12 would be excused for personal reasons. The juror had sent a formal request to the judge in a note. It's not known if this juror is the same one who asked on Tuesday to get "out" of the case. Details of the note were not disclosed in open court, although one person who had seen the note said the request was a " personal" one that had nothing to do with the deliberations in the juryroom.

WTC leaseholder Larry Silverstein has been vying to have the terrorist attacks declared two events for insurance purposes so that he can collect two payments of $3.5 billion. All sides agreed that the WilProp form was sent out to all of the insurers when the broker, Willis Group Holdings Ltd. (WSH, news), was first shopping for insurers. The WilProp form specifically defines the word " occurrence" and views the terrorist attacks as a single event.

However, Silverstein's team contends the form was switched in July 2001 to another form that doesn't define the word "occurrence," thereby leaving the door open for the attacks to be deemed two events, entitling him to a possible double payment.

Lawyers for Swiss Re and Larry Silverstein declined to comment on Thursday's partial verdict. Silverstein spokesman Howard Rubenstein cited the continuing deliberations on Swiss Re.

However, other legal teams eagerly commented.

Lawyer Christopher Finazzo, who represented Wausau, was elated. "The jury took longer than we liked but they reached the right decision for Wausau," he said. Kenneth Erickson, who represented the London insurers, said he was " gratified with the result."

David Boies, who also represented the London insurers, said he believes the entire case "probably will" change the way insurance policies are drawn up in the future, and that underwriters may have to be more clear when drawing up binders and slips.

Boies, reached in Tallahassee, Fla., where he's working on another case, admits he was a bit concerned Tuesday when one juror wanted to be dismissed. He said the reasons for the request were not given, and it could have reflected " some kind of deep disagreement" within the jury room.

Lawyer Grant Hanessian, who represented QBE International Insurance Ltd., said his client was "very pleased" with the verdict, and said it reflected the credibility of the testimony given by QBE's underwriter, Thierry Kanias.

The three companies that the jury ruled did not bind on the WilProp form will advance to the next phase of the trial, where a new jury and trial will determine if other policy forms view the terrorist attacks as one event or two.

Seven other insurers - who were not part of this trial - are already in this phase: Allianz, IRI, Travelers, SCOR S.A. (SCO, news), Gulf, TIG and Tokyo Marine. These insurers, which all bound on other policy forms, represent $956.4 million of the WTC insurance coverage.

Jury deliberations on the Swiss Re question will resume Monday.

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