Unit 7 Discussions (6)

*

Unit 7 DB: Protecting the Business

(FIN401 Insurance & R

isk Management)

On the morning of September 11, 2001, two airplanes, American Airlines Flight 11 and United

Airlines Flight 175, collided into the north and south towers (the main “Twin Towers”) of the

World Trade Center complex in New York City. Shortly thereafter, as a

result of fires caused by

burning jet fuel and falling debris, the Twin Towers collapsed (south tower

–

9:59 am; north

tower

–

10:28 am), resulting in significant damage to remaining five other towers that made up

the complex and the buildings in the vicin

ity. The collisions were the result of acts of terrorism

perpetrated by a foreign terrorist group.

Larry Silverstein, the leaseholder of the WTC Properties, entered a 99

-

year lease of the complex

just a few months prior to the attacks. To protect his lease

, Mr. Silverstein had multiple layers of

insurance placed on the complex through various insurance companies. After the attacks, Mr.

Silverstein sought to collect on the various insurance policies, arguing that the attacks were two

separate instances of an

“occurrence” under the respective policies and as such, the policies

should cover the resulting damage separately. The insurers challenged Mr. Silverstein’s position

(some of the insurers argued that the attack constituted one continuous attack, although

multiple

planes were involved). Litigation ensued.

Additional information regarding the WTC litigation:

·

The litigation with the insurers took over 6 years to finalize through settlement.

·

There were over seven different insurers involved. The insurers incl

uded primary

coverage insurers (they provided the initial layer of coverage on the property) and excess

insurers (these insurers covered the property above the primary insurer(s), and other

excess insurers, but only up to their additional limit of coverage

).

·

Mr. Silverstein originally argued that the attacks were two separate occurrences under the

respective insurance policies, valued at $3.5 billion each. Thus, he argued that the

insurers were collectively responsible, under their respective policies and

up to their

respective limits of liability, for $7 billion in insurance coverage.

·

After a series of court hearings, the court determined that the maximum that could be

recovered from the insurers was $4.68 billion.

·

Through a series of settlement negotiati

ons with the insurers, Mr. Silverstein was able to

recover $4.55 billion (about 97% of the maximum recovery).

·

If the matter did not settle, it was estimated that it would take another 2

-

3 years minimum

of litigation, including appeals, to fully resolve th

e case.

Discuss whether Mr. Silverstein had a valid claim and the impact of coverage on commercial

insurance coverage. Your response should include what you have learned about commercial

property insurance in the Unit and the applicable insurance provisio

ns that may have resulted in

coverage for the structures.

*Unit 7 DB: Protecting the Business (FIN401 Insurance & Risk Management)

On the morning of September 11, 2001, two airplanes, American Airlines Flight 11 and United

Airlines Flight 175, collided into the north and south towers (the main “Twin Towers”) of the

World Trade Center complex in New York City. Shortly thereafter, as a result of fires caused by

burning jet fuel and falling debris, the Twin Towers collapsed (south tower – 9:59 am; north

tower – 10:28 am), resulting in significant damage to remaining five other towers that made up

the complex and the buildings in the vicinity. The collisions were the result of acts of terrorism

perpetrated by a foreign terrorist group.

Larry Silverstein, the leaseholder of the WTC Properties, entered a 99-year lease of the complex

just a few months prior to the attacks. To protect his lease, Mr. Silverstein had multiple layers of

insurance placed on the complex through various insurance companies. After the attacks, Mr.

Silverstein sought to collect on the various insurance policies, arguing that the attacks were two

separate instances of an “occurrence” under the respective policies and as such, the policies

should cover the resulting damage separately. The insurers challenged Mr. Silverstein’s position

(some of the insurers argued that the attack constituted one continuous attack, although multiple

planes were involved). Litigation ensued.

Additional information regarding the WTC litigation:

 The litigation with the insurers took over 6 years to finalize through settlement.

 There were over seven different insurers involved. The insurers included primary

coverage insurers (they provided the initial layer of coverage on the property) and excess

insurers (these insurers covered the property above the primary insurer(s), and other

excess insurers, but only up to their additional limit of coverage).

 Mr. Silverstein originally argued that the attacks were two separate occurrences under the

respective insurance policies, valued at $3.5 billion each. Thus, he argued that the

insurers were collectively responsible, under their respective policies and up to their

respective limits of liability, for $7 billion in insurance coverage.

 After a series of court hearings, the court determined that the maximum that could be

recovered from the insurers was $4.68 billion.

 Through a series of settlement negotiations with the insurers, Mr. Silverstein was able to

recover $4.55 billion (about 97% of the maximum recovery).

 If the matter did not settle, it was estimated that it would take another 2-3 years minimum

of litigation, including appeals, to fully resolve the case.

Discuss whether Mr. Silverstein had a valid claim and the impact of coverage on commercial

insurance coverage. Your response should include what you have learned about commercial

property insurance in the Unit and the applicable insurance provisions that may have resulted in

coverage for the structures.