Zurich NA Gives Details on WTC Lawsuits

Zurich American Insurance Company (ZAIC) has given additional details, and clarified the company’s position, on the recently filed lawsuit against Larry Silverstein and other entities in a dispute related to the destruction of the World Trade Center. (See IJ Website Jan. 20)

The IJ’s original report was in many respects incomplete and contained some inaccuracies. Thanks to the advice received from Keith Owens, Zurich North America PR Manager, the basic contents of the company’s actions have now been elucidated.

ZAIC originally concluded a binder with one named insured, Trade Center Properties LLC, an affiliate of Silverstein Properties and Larry Silverstein for coverage of liability for WTC related incidents. At the time that binder was signed in July 2001, and when the formal policy was issued in November 2002, following the destruction of the WTC, it consisted of two general liability policies. – a primary policy with $2 million limits, and a “commercial umbrella policy” with $50 million policy limits.

ZAIC’s total exposure to any claims is therefore limited to $52 million. The figure of $1 billion in liability coverage is an estimate of the total coverage the Silverstein group may have, and includes 17 other insurers who undertook to assume portions of the risk. They have been named as defendants in ZAIC’s complain in order to resolve the dispute surrounding the coverage in one action.

The central question posed by ZAIC’s lawsuit does not in fact involve the eventual payment of its portion of any judgment against the Silverstein interests, but seeks to resolve two other highly important questions:
1) To confirm what entities are actually covered by the policy. In addition to the one original named insured, Silverstein has sought coverage for 24 additional “insureds,” including the Port Authority of New York and New Jersey, who own the WTC property; and

2) To establish that ZAIC does not have a duty to defend Silverstein or the other “asserted insureds” in the ongoing liability actions that have been filed against them as a result of the Sept. 11 attacks.

Paragraph 5 of ZAIC’s complaint sets forth the applicable language as follows: “The ZAIC Policies, unlike many other commercial general liability policies, do not provide for an insurer-funded and arranged legal defense to claims of liability or for reimbursement of the costs of such defense. Instead, the Named Insured retains responsibility for all defense costs. At the time coverage under the Policies was bound, the Silverstein Interests’ representatives acknowledged that coverage for defense costs would not be provided by ZAIC for the World Trade Center Premises, and expressly agreed to this arrangement.” The company therefore contends that any requests for it to defend the Silverstein interests are not within the ambit of its liability policy.

In its complaint for declaratory judgment, ZAIC asked the Court to settle these rather important questions concerning the scope and application of policies of liability insurance procured from ZAIC by World Trade Center Properties LLC. Owens indicated that “we’ve held discussions with many of the parties involved, since early 2002.” So far, however, no agreements have been reached, and Silverstein’s filing of a lawsuit against ZAIC – but apparently not against the other companies who also have potential liability coverage – more or less forced the company to seek judicial guidance to clarify the situation.

ZAIC said that it “has pursued and continues to actively pursue discussions with all parties, including a proposal to engage in mediation.” Essentially the lawsuit is part of an ongoing effort to resolve the conflicts that have been raised over its responsibilities vis-à-vis its policy holder(s).