9/11-The Destruction of the World Trade Center

Within days of 9/11, it became apparent that the destruction of the World Trade Center presented the insurance industry with a highly complex set of valuation and coverage issues. With the entire world watching the developments at Ground Zero, the post-loss environment required a coordinated, strategic response. Within weeks of September 11, 2001, Zelle Hofmann committed the unique depth of the firm’s resources to coordinate coverage, subrogation and reinsurance issues for one of the world’s largest property insurers.  9/11 required a priority relationship with a single property insurer in order to execute a strategy that:

• provided consistent analysis and business judgment to the entire book of business at risk. This approach helped assure that the credibility of the company would not be risked by inadvertently advocating inconsistent positions on substantive or procedural issues. 
• eliminated the need to “reinvent the wheel” on each 9/11 claim.

The World Trade Center claim alone represented the loss of 10 million square feet of commercial office space. In addition, Zelle Hofmann attorneys were also responsible for claims made under almost 100 different insurance contracts, including highly complex property and time element claims related to the loss of:

• major financial institutions
• insurance brokers
• retail stores
• communications infrastructure
• governmental agencies
• rail transportation infrastructure

The 9/11 experience proved to be as complex and challenging as originally predicted. All told, the firm resolved billions of dollars of claims through a combination of adjustments, mediations, appraisals, arbitrations, jury trials, multiple trips to the Second Circuit Court of Appeals, and delicate political negotiations with local, state and federal elected officials, including the New York Department of Insurance.  As a result of Zelle Hofmann’s 9/11 related efforts, important precedent has been established for the industry in all relevant aspects of a property insurance policy:

COVERAGE

• The insurer’s right to appraisal. S.R. Int’l Bus. Ins. Co. v. World Trade Ctr. Props. LLC,  2002 US Dist. LEXIS 15272. (S.D.N.Y. August 19, 2002).
• The insured does not have a right to prejudgment interest pending appraisal.
• The appropriate scope of replacement cost coverage. S.R. Int’l Bus. Ins. Co. v. World Trade Ctr. Props. LLC, 2006 U.S. Dist. Lexis 79326, *6 (S.D.N.Y. Oct. 31, 2006).
• The appropriate measure of the period of restoration for a time element claim.   SR Int’l Bus. Ins. Co. v. Allianz Ins. Co., LLC, 2005 U.S. Dist. LEXIS 13001.  (S.D.N.Y February 16, 2005).
• The trigger of leasehold interest coverage.
• The effect of a post-loss assignment on a time element claim. SR Intl Bus. Ins. Co. v. World Trade Ctr. Props., LLC, 394 F. Supp. 2d 585 (S.D.N.Y. Oct. 5, 2005).

SUBROGATION

• The insurers’ priority of subrogation rights.  SR Int’l Bus. Ins. Co. v. Allianz Ins. Co., LLC, 343 F. Appx. 629 (2d Cir. July 28, 2009).
• The New York collateral source statute CPLR 4545(c) does not bar insurer’s subrogation recovery.  In Re September 11th Litigation, 649 F. Supp. 2d 171 (S.D.N.Y. August 13, 2009).
• Recoverable damages in a subrogation matter.  In Re September 11th Litigation, 590 F. Supp. 2d 535 (S.D.N.Y. December 10, 2008).

REINSURANCE

The firm also handled the following reinsurance issues:

• follow the fortunes doctrine
• recoverability of loss adjustment expenses
• reinsurance reinstatement issues
• claims control issues

Our approach to the 9/11 disaster is an example of how we represent clients facing major unprecedented claims.  When faced with such situations, you need the best experience you can find.  Talk to us about your needs and decide for yourself.