Judge Narrows N.Y.-N.J. Port Authority’s 9/11 Insurance Claim

February 25, 2008

The Port Authority of New York and New Jersey can collect insurance only for damage inflicted on two buildings of the World Trade Center site destroyed on Sept. 11, 2001, rather than for the entire complex, a U.S. District Court judge ruled on Monday.

The decision turned on whether the Port Authority’s insurance policies excluded the rest of the World Trade Center complex because the agency had leased it to developer Larry Silverstein, who had bought his own insurance.

Judge Barbara Jones, of U.S. District Court for the Southern District of New York, upheld what is known as the “Exclusion f” section of the Port Authority’s policy, saying it “applies in the present case and removes the Silverstein property from coverage under the Port Authority insurance program.”

Under her ruling, the Port Authority, which owns the site, will be able to collect insurance only for one World Trade Center building, known as Building Number 6, and for the PATH train station, which is the trans-Hudson link with New Jersey.

A Port Authority spokesman had no immediate comment on the latest twist in the many battles over insurance spawned by the destruction of the twin towers that anchored Manhattan’s financial center.

The amount of insurance money that the bi-state agency will get is a critical issue, partly because construction costs keep climbing and several projects, including the memorial, have already been scaled back.

The Port Authority recently finished the excavation work needed for Silverstein to begin work on two of the three skyscrapers he will build.

But several other hurdles to the vast rebuilding project remain, including completing demolition of the Deutsche Bank building, just south of where the World Trade Center stood.

Jones, in her ruling, also rejected the agency’s claim that she should not rule until Silverstein had fulfilled his obligation to rebuild the complex.

“Not only does the Port Authority fail to support this argument with citation to any case law, but this position is, in fact, contradicted by the controlling decisions on this issue,” she wrote.

Robert Skinner, a lawyer for Ropes & Gray in Boston who represented insurance market Lloyds of London , said the Port Authority still wants as much as $3 billion for the damage to Building Number 6 and the train system. Skinner, however, said the insurers believe the damages suffered were less than $1.5 billion.

In addition, the Port Authority’s $3 billion claim is partly based on its argument that the attacks were two separate events, Skinner said. Silverstein fought his insurers in court to get the attacks termed two occurrences.

If Jones follows the precedents set by other courts who ruled on Silverstein’s claims, she will decide that this question is settled by how the different insurers wrote their policies, according to Skinner.

The other insurers included in the decision were: GlobalRisks UK Ltd, Copenhagen Reinsurance Co Ltd, Great Lakes Reinsurance (UK) PLC Houston Casualty Company, QBE International Insurance Ltd, Sirius International Insurance Corp, Wurttembergische Versicherung AG, Zurich Specialities London Ltd, Allianz Global Risks US Insurance Co. (Editing by Leslie Adler)

(Reporting by Joan Gralla, Editing by Richard Satran)

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