Insurers Agree to Pay Billions at Ground Zero
Insurers Agree to Pay Billions at Ground Zero - nytimes.com
By CHARLES V. BAGLI
Published: May 24, 2007
NEW YORK TIMES
The Spitzer administration announced the settlement of all insurance claims at ground zero yesterday, ensuring that $4.55 billion will be available for rebuilding the World Trade Center site.
The agreement, which the insurers described as the largest single insurance settlement ever undertaken by the industry, ended a protracted legal battle with insurers over payouts related to the terrorist attack.
New York State and Port Authority officials said yesterday that the deal removed any uncertainty over how much money would be available for rebuilding and would enable them to obtain private financing for the $9 billion project.
Officials had worried that the insurance dispute might drag on for years, eating up millions of dollars in lawyers’ fees and potentially delaying reconstruction. The settlement is the culmination of a two-month campaign by the state insurance superintendent, Eric R. Dinallo, and involved meetings in Geneva, Paris and Delaware.
The agreement was reached with seven of the two dozen insurers for the trade center who had not already settled — Allianz Global Risks, Travelers Companies, Zurich American, Swiss Re, Employers Insurance, Industrial Risk Insurers and Royal Indemnity. They agreed to pay a total of $2 billion. The other insurers had already made good on their claims and paid about $2.55 billion.
In recent weeks, Gov. Eliot Spitzer joined the negotiations with the seven companies, which lasted until the early morning yesterday.
“The unsettled insurance claims were the last major barrier to rebuilding and have been bitterly and intensely contested for almost six years,” Governor Spitzer said in an interview. “This means we can now fund construction, access the financial markets and move on to what should be our primary focus: rebuilding.”
Business leaders downtown, who have been frustrated by the legal and political wrangling and years of delays, were elated by the news.
“The downtown business community is pleased with the efforts of the governor and the insurance superintendent in removing the remaining uncertainty over the financing of the World Trade Center site,” said Eric J. Deutsch, president of the Alliance for Downtown New York. “In conjunction with a strong office market, the settlement will ensure success.”
All the parties to yesterday’s settlement signed confidentiality agreements barring them from saying how much each insurance company would pay.
The insurance money is critical to the rebuilding effort, but it can cover only about half of the $9 billion cost of building five towers, retail space and possibly a hotel.
“The train is now moving down the tracks,” said Larry A. Silverstein, the 76-year-old developer who had leased the World Trade Center complex six weeks before the Sept. 11 attack.
The Port Authority of New York and New Jersey, which owns the land at ground zero and built the trade center, will get about $870 million from yesterday’s settlement, which is to go toward the cost of erecting the $3 billion Freedom Tower, the tallest and most symbolic skyscraper planned for ground zero, as well as the retail space at the complex.
Mr. Silverstein will get the remaining $1.13 billion for three large office towers to be built along Church Street, between Vesey and Liberty Streets.
As part of the deal, the Port Authority and Mr. Silverstein had to relinquish their claim that the companies owed more than $500 million in interest resulting from delays in making the payments. The insurers, in turn, abandoned their claim that they did not owe the money until the project was completed, in 2012.
Despite the insurance dispute, there has been some activity at the 16-acre trade center site. Hundreds of construction workers are laboring on the Port Authority’s $2 billion PATH train station and the foundation of the Freedom Tower. The authority expects to turn over the eastern portion of the site to Mr. Silverstein at the end of this year so that he can begin building. He completed a nearby tower, 7 World Trade Center, last year.
“Look how far we’ve come in the last year,” Mr. Silverstein said yesterday. “A year ago today, we opened 7 World Trade Center, a huge success and a validation of downtown as a world-class business district. We’ve started construction on the Freedom Tower. We reached an agreement on who would build what and when. And now we have the resources to rebuild as quickly and spectacularly as possible.”
Mr. Spitzer said the agreement, which ends all the litigation, was a collaborative effort on the part of many officials who had lost “patience with the ongoing fighting that didn’t serve the public interest or the effort to rebuild.”
Officials and real estate executives involved in the negotiations said they had asked the administration of Governor Spitzer’s predecessor, George E. Pataki, to have the state’s insurance superintendent become involved in the settlement effort, but that it never happened. That changed in late March when Mr. Spitzer’s superintendent, Mr. Dinallo, convened a meeting of the insurers, the Port Authority and the developer to prod them into a settlement.
Mr. Dinallo was working in tandem with Albert M. Rosenblatt, a retired judge who was overseeing an arbitration proceeding in the case.
Andreas Shell, claims crisis coordinator for Allianz, said at a news conference that it was the largest insurance settlement in industry history and that his company was “extremely happy with the result.”
The insurance battle has been complicated from the start by the circumstances of Mr. Silverstein’s lease of the trade center and the destruction of the complex by terrorists six weeks later. At that time, two dozen insurers had signed binders pledging to provide $3.5 billion in insurance coverage, but had not finished the documents.
An ugly dispute developed over which insurance policy was in effect at the time of the attack. Mr. Silverstein argued that since two jetliners had slammed into the two towers, he was entitled to a double payment on the $3.5 billion policy. But many of the insurers countered that they had agreed to a different policy that did not permit double claims.
In the sparring, the insurers attempted to paint Mr. Silverstein as a rapacious developer interested only in profiteering, while he asserted that the companies were being tight-fisted and shirking their moral and legal responsibilities.
At the end of two lengthy trials in 2004, a federal court found that the insurers owed a maximum of $4.6 billion, less than the $7 billion that Mr. Silverstein originally claimed but more than the $3.5 billion limit of the policy. Ever since, state, city and Port Authority officials have called on the insurance companies to make their payments in full.
Mr. Spitzer thanked 14 politicians yesterday for their help, including Senators Charles E. Schumer and Hillary Rodham Clinton. In a statement, Mayor Michael R. Bloomberg commended the governor and Mr. Silverstein for the settlement.