World Trade Center Leaseholder Loses Bid to Cover Legal Costs

June 15, 2006

A judge has ruled that World Trade Center leaseholder Larry Silverstein cannot force insurance companies to pay his legal fees related to litigation stemming from the Sept. 11 terrorist attacks.

U.S. District Judge Alvin K. Hellerstein said Thursday that it would be unjust for Silverstein to make the companies pay his defense costs when all but one of more than a dozen companies had made it clear in their policies that they would not cover the costs.

Hellerstein, who is considering some 3,000 lawsuits related to the attacks, wrote that he had made a similar ruling once before.

“There is no time for further delay in this insurance litigation,” he wrote, adding that it was Silverstein’s second attempt to get the companies to cover defense costs that he had not been granted during negotiations.

Dara McQuillan, a spokesman for Silverstein Properties Inc., said: “We are disappointed in the decision and we think it’s wrong. However, this decision will have no impact on the WTC rebuilding effort.”

Lawyers for Silverstein had argued that the language in policies could be interpreted to mean that the companies intended to pay defense costs.

Hellerstein rejected that argument and others made by the defense, saying a full presentation of documents by both sides had provided “indisputable evidence” that the insurers did not intend to pay the costs.

Hellerstein said he was “unwilling to … rewrite the policies to include coverage for defense costs.”

The judge said the evidence was particularly strong that the lead insurer, Zurich American Insurance Co., did not intend to cover defense costs.

“To now impose a defense obligation would give a windfall to Silverstein and subject Zurich to a liability that it was unable to calculate or prepare for by an appropriate premium, and thus would work a manifest injustice,” he said.

Silverstein, who leases the trade center site from the Port Authority of New York and New Jersey, has had to pay for the defense in about 300 lawsuits filed by or on behalf of people killed or injured in or around the twin towers.

The lawsuits allege breaches of duty of care by the Port Authority or its lessees.

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