Focus changes for second phase of Silverstein coverage trial

As the second phase of the World Trade Center insurance coverage trial begins this week, one lawyer says a key difference in this case will be the “intent” of insurers.
Most of the carriers who insured the WTC when the towers collapsed on September 11, 2001 as a result of terrorism were successful during the first phase of the case in claiming to be bound by the “Wilprop” (Willis property) policy form this form defines “occurrence” such that the buildings’ collapse would likely be deemed just one event, rather than two. WTC leaseholder Larry Silverstein claims the collapse of the twin towers should be considered two events, with each of the buildings struck by separate planes, thus doubling the policy limit to about US$7 billion.
This second court case “is more focused on what the underwriter intended when he/she wrote the policy language”, says David Wood, partner at Wood & Bender. However, this may to some extent represent a psychological challenge for insurers to convince jurors an underwriter could have intended any policy wording to deal with a scenario on the level of 9/11.
Another issue will be the level of involvement Silverstein as client had in the formation of the policy. The WTC policy, underwritten by a large consortium of insurers, was not finalized prior to 9/11, a situation not unusual with large commercial policies. The “policy jacket” or foundation of the policy is generally written up months prior to the actual purchase, and is later amended as endorsements and other terms are negotiated, Wood explains. In the WTC trial, he notes, “with very few exceptions, insurers are going to be in a position of defending a pre-printed term in a policy”.
Beyond the actual outcome of the trial, this manner of conducting business in the insurance industry has been thrown into the spotlight. Wood notes that many of his clients are asking how they can work against the industry practice of signing a policy, paying the premium and then working out the details of coverage later. “When coverage is bound, you rarely know 100% of the details of what the policy will say,” he says, pointing to the need for a “sane equilibrium” between the need to conduct business in a timely fashion and yet still have solid contracts in place.
Wood advises clients to take several steps to gain more control over the process:
– ask to see a “specimen copy” of the policy jacket, to ensure you understand at least the bare bones of the policy;
– request specimen copies of applicable endorsements, the majority of which are on forms which should be readily available;
– if there are problems with any of these forms, raise the issue before signing because, as Wood notes, “it makes little sense to bring those issues up after you’ve already agreed to buy the policy”.
Clients should leverage their broker’s relationship with the insurer in order to learn as much about the policy as possible before signing, Wood adds. In the end, the process is much like that with any contract, he concludes, “just know what you’re signing”.