Silverstein Pushes Two-Planes, Two-Claims Argument

NEW YORK CITY-Larry Silverstein held court at the Waldorf Astoria hotel yesterday as his legal team put the final touches on its answer to reinsurer Swiss Re’s lawsuit seeking to limit the World Trade Center developer’s payout.

Silverstein hit hard and often on his now-ubiquitous two-planes, two-claims argument during a roundtable luncheon on the future of mega-transactions. The discussion was part of New York University Real Estate Institute’s annual real estate investment conference.

“The first thing you have to learn in real estate is to distinguish between one event and two events. That’s fundamental,” Silverstein quipped, referring to his oft-repeated contention that the trade center towers were destroyed in two separate acts. Often flippant in his remarks, the developer also spoke passionately about the need to redevelop the trade center site for the well-being of the city and the nation.

However, with his attorneys on the verge of filing court papers responding to Swiss Re’s suit, which argues that the trade center bombings constituted a single event meriting a single claim, the developer never veered far from his main theme. He hammered home his argument that the twin towers fell in two separate attacks and that, as such, he is entitled to two payouts on his $3.6 billion-per-event coverage.

“I never fully appreciated the meaning of the word ‘event’ as I do today. It makes the difference between $3.6 billion and $7.2 billion,” Silverstein said. “There were two planes, two separate and distinct aircraft hitting two separate and distinct towers in two separate and distinct timeframes.”

While Silverstein’s camp insists that it will respond to Swiss Re’s lawsuit with ample case law countering the reinsurer’s claim that the attacks comprised a single occurrence, Jacques Dubois, CEO and president of Swiss Re America Holding Corp., tells GlobeSt.com that Silverstein’s case won’t stand up.

“[We are] seeking to confirm through the courts that under Swiss Re’s agreement to insure that the coordinated attack by Al Qaeda constituted one insurable loss under the terms of our agreement,” Dubois says. “Under the terms of any insurance policy, the coordinated attacks would be one insurance loss.”

But Marc Wolinsky, an attorney with Wachtell, Lipton Rosen & Katz, the firm representing Silverstein, says there is plenty of legal precedent for his client’s argument. “There is lots of case law construing the word occurrence–all our way,” Wolinsky says.

According to documents obtained by GlobeSt.com, Wachtell, Lipton plans to base its case largely on a 1959 New York Court of Appeals decision involving flood damage to adjacent buildings. In Arthur A. Johnson Corp v. Indemnity Ins. Co., two adjacent buildings under the same ownership were damaged when walls protecting the adjacent basements collapsed as a result of flooding caused by heavy rains. The Court of Appeals ruled that the collapses, which occurred 50 minutes apart, were separate “accidents,” clearing the way for two insurance claims.

Dubois, however, says Silverstein’s argument is all wet. “Any case law [Silverstein cites] is off the point, wide of the mark. The law is definitely on our side in a coordinated event such as the World Trade Center [attacks].”

Nevertheless, Silverstein maintains that victory is all but assured. “My lawyers read me the law of the State of New York and they read me the wording on the policy and it looks to me like we’re going to end up with $7.2 billion on the World Trade Center site,” he said at today’s event. “Will there be a shortage of capital to rebuild? It would appear not.