WTC Judge to Litigants: ‘Lower the Tide of Bile’

January 2, 2004

U.S. District Judge Michael B. Mukasey has reportedly had enough of the internal and external sniping between Swiss Re and other insurers and Silverstein Properties in the dispute over the recovery for destruction of the Twin Towers.

According to an AP report, he told all parties at a hearing in Manhattan last Wednesday to do something to stem the puddles of bile “lapping at the top of my shoes.” Since the day Swiss Re filed its declaratory relief action in Oct. 2001, the parties have been launching broadsides at one another defending their respective positions and attacking the other side.

Even with $3.5 billion at stake, the venom expressed by both sides has been exceptionally nasty, running the gamut from charges of fraud, lying, false testimony, hiding documents, bad faith and various conspiracies. While these charges have often been made in court, both sides have also made widespread use of the media to broadcast their vituperative statements about the other in an apparent attempt to sway public opinion.

Their all to apparent dislike for one another has become a major obstacle preventing settlement of the case, which is now scheduled to begin trial on Feb. 9. The verbal sniping has essentially backed both parties into a corner from which they can’t escape, and has made any out of court agreement far more difficult to achieve.

As it now stands, Judge Mukasey has split the lawsuit into a separate series that would include three trials. The first would settle the question as to which binding forms determine coverage. The WilProp form, which includes the term “an occurrence or series of occurrences” in reference to losses, supports Swiss Re’s “one occurrence” theory. The Travelers form doesn’t contain such language and is relied on by Silverstein to support his “two occurrence” position. Each of the 19 insurance companies would be entitled to a decision.

A second trial would address the issue of whether the destruction of the WTC was one or two occurrences, as far as each insurer is concerned, based on the coverage language decisions of the first trial.

A third trial would assess the amount of recovery Silverstein and the Port Authority are entitled to receive based on those decisions. An earlier court decision in favor of three insurance companies, which found that they had relied exclusively on the WilProp form, has been upheld on Appeal.

Silverstein hopes to collect about $7 billion in insurance proceeds to fund reconstruction of the WTC. But the insurers claim, that they are liable for only half that amount, threatens to halt any serious rebuilding efforts until a decision is reached. While the situation is wholly defensible from a legal standpoint, from a political and economic standpoint it’s intolerable, with the prospect of unending legal appeals from both sides.

Judge Mukasey’s warning is a timely, if somewhat overdue, reminder to both sides that perhaps they should stop attacking one another and try cooperating for a change. He has a powerful ally. New York’s Governor George Pataki has said in no uncertain terms that he wants the cornerstone of a new WTC complex laid by next August, when the Republican Party Convention comes to town.

At this point it remains uncertain whether even Pataki’s powerful influence can bring the squabbling parties to the bargaining table.

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