Jeffrey Wade
Larry Silverstein, a prominent New York real estate developer, made headlines after the 9/11 attacks for his insurance claim related to the destruction of the World Trade Center. Silverstein had signed a 99-year lease on the World Trade Center just two months before the attacks. He collected nearly $4.6 billion from insurers after a protracted dispute over whether the attacks constituted one or two events under the terms of the insurance policy. While some sources claim that Silverstein's decision to purchase terrorism insurance just before 9/11 was no coincidence, others refute this, stating that the World Trade Center was likely already covered against terrorist acts before Silverstein took over the lease.
| Characteristics | Values |
|---|---|
| Larry Silverstein's insurance claim | Larry Silverstein claimed the two separate plane strikes on two separate buildings constituted two occurrences within the meaning of the policies. |
| Insurance company's stance | The insurance companies took the opposite view, stating that the attacks were one event. |
| Court verdict | The court ruled in favor of Silverstein, awarding him $4.55 billion, which was less than the claimed amount. |
| Number of insurers | Silverstein had to deal with 22 insurance companies during the dispute. |
| Length of dispute | The dispute lasted for several years before reaching a settlement in 2007. |
| Use of funds | The insurance payout was used for the rebuilding of the WTC complex, including the "Freedom Tower." |
| Silverstein's role | Silverstein was not the sole leaseholder but led a consortium of investors and lenders, including GMAC Commercial Mortgage and Westfield America Inc. |
| Terrorism insurance coverage | Pre-9/11, commercial insurance policies in the US typically covered terrorist incidents without specific exclusions. |
| Previous terrorist attack coverage | The World Trade Center was fully covered for the 1993 bombing, and insurers paid out an estimated $510 million in damages. |
| Allegations of insurance fraud | There are claims that Silverstein committed insurance fraud by insuring against terror attacks from planes shortly before 9/11. |
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What You'll Learn
Larry Silverstein's insurance claim
Larry Silverstein, a prominent New York real estate developer, made headlines after the 9/11 attacks for his insurance claim related to the destruction of the World Trade Center. Silverstein had signed a 99-year lease on the World Trade Center just two months before the attacks.
The insurance claim was complex and controversial. Silverstein initially sought to collect double the face amount of the insurance policy ($7.1 billion), arguing that the two separate plane strikes into two separate buildings constituted two occurrences within the meaning of the policies. The insurance companies disputed this claim, arguing that the attacks should be considered a single "occurrence". They also questioned Silverstein's absence from the buildings on the day of the attacks, suggesting the possibility of fraud.
After a protracted legal battle involving multiple trials and appeals, a series of court decisions determined that the attacks constituted two occurrences under the terms of the insurance policies for nine of the insurers, resulting in a maximum payout of $4.55 billion for buildings 1, 2, 4, and 5. The total potential payout was capped at $4.577 billion, less than the amount Silverstein had sought.
The insurance claim and subsequent payout to Silverstein sparked debates and conspiracy theories about the timing of the lease and insurance coverage. Some considered it fortuitous that Silverstein had taken out terrorism insurance just months before the 9/11 attacks, implying that he may have had advance knowledge of the impending terrorist acts. However, others refute this implication, noting that such terrorism coverage was standard in commercial insurance policies before 9/11 and that Silverstein was contractually obligated to insure the World Trade Center upon signing the lease.
Ultimately, the insurance claim and rebuilding efforts following the 9/11 attacks presented significant challenges for Silverstein, who spent many years navigating legal disputes, overcoming obstacles, and fulfilling his obligation to rebuild the World Trade Center site.
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Terrorism insurance
There is an urban legend that Larry Silverstein, the leaseholder of the World Trade Center, took out terrorism insurance just months before the 9/11 attacks. However, this claim is only partly true. Silverstein did take out an insurance plan that covered terrorism, but, at the time, such coverage was automatically included in all-risk insurance policies. Furthermore, Silverstein was not the sole leaseholder of the World Trade Center; he led a consortium of investors and lenders, all of whom had a say in deciding the insurance coverage of the properties.
The 9/11 attacks cost the insurance industry approximately $59 billion in losses, making it the most expensive terrorist incident in the US and one of the largest single insured loss events ever. Following the attacks, reinsurers drastically reduced their terrorism coverage or stopped offering it altogether. This led to a decrease in the availability and affordability of terrorism insurance for US businesses.
To address this issue, the US government passed the Terrorism Risk Insurance Act (TRIA) in 2002. This act established a three-year Terrorism Insurance Program within the Department of the Treasury, which was later extended multiple times through subsequent legislation. The program aims to ensure the availability and affordability of terrorism insurance for businesses by providing federal financial support to insurers in the event of terrorist attacks.
The most recent reauthorization of the program, the Terrorism Risk Insurance Program Reauthorization Act of 2019, extends the program through December 31, 2027. This legislation also includes provisions for evaluating the availability and affordability of terrorism insurance for places of worship and studying the risks associated with cyberterrorism.
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The 9/11 attacks
Just months before 9/11, the World Trade Center's lease was sold to Larry Silverstein, a prominent New York real estate developer. Silverstein took out an insurance plan that covered terrorism. After 9/11, Silverstein took the insurance company to court, claiming he should be paid double the amount because there were two separate attacks. The insurance companies challenged Silverstein’s claim, arguing that the attacks should be considered a single “occurrence”. They also argued that Silverstein's absence from the buildings on the day of the attacks raised the possibility of fraud.
Ultimately, Silverstein won the case and was awarded $4.55 billion. However, it is important to note that Silverstein was not the sole leaseholder of the World Trade Center. He led a consortium of investors and lenders, including GMAC Commercial Mortgage, Westfield America Inc., and real estate investor Lloyd Goldman, all of whom had a claim on the insurance monies paid out.
While the story of Silverstein's insurance claim contains elements of fact, it is also partly fiction. It is true that Silverstein took out terrorism insurance before the 9/11 attacks, but there is no evidence to suggest that he knew in advance that the attacks would take place. Additionally, it was common practice at the time for commercial insurance policies to cover terrorist incidents as the risk was considered remote.
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The World Trade Center lease
In January 2001, Larry Silverstein made a $3.22 billion bid to lease-purchase the World Trade Center. Vornado Realty outbid him by $30 million, but they withdrew in March, leaving Silverstein 14 days to negotiate a new bid. His final bid was accepted on July 24, 2001, in partnership with Westfield America, Inc. This was the first time in the complex's 31-year history that it had changed management. Silverstein put up $14 million of his own money to secure the deal.
After 9/11, Silverstein went to court with the insurance company, claiming he should be paid double the face amount (~$7.1 billion) because the two separate plane strikes into two separate buildings constituted two occurrences within the meaning of the policies. The insurance companies disagreed, arguing that it was one occurrence. The matter went to court, and in 2004, a jury ruled that ten of the insurers were subject to the "one occurrence" interpretation, limiting their liability to the face value of those policies. However, nine insurers were deemed subject to the "two occurrences" interpretation and liable for a maximum of double the face value of those policies ($2.2 billion). The total potential payout was capped at $4.577 billion for buildings 1, 2, 4, and 5. A settlement was reached in 2007, with insurers agreeing to pay out $4.55 billion, which was less than Silverstein had sought.
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The insurance payout
Secondly, the amount of coverage for rebuilding the World Trade Center buildings was disputed. Silverstein's insurance policies for the buildings had a collective face amount of $3.55 billion per event, which was the minimum demanded by his lenders. However, Silverstein and his insurers became embroiled in a multi-year dispute over the amount payable, with Silverstein initially seeking a higher payout.
The legal battle over the insurance payout involved multiple trials and appeals. The first trial resulted in a verdict that ten insurers were subject to the "one occurrence" interpretation, while three insurers were added to a second trial group. The second trial found that nine insurers were subject to the "two occurrences" interpretation, liable for a maximum of double the face value of those policies ($2.2 billion). The total potential payout was capped at $4.577 billion for buildings 1, 2, 4, and 5.
Ultimately, a settlement was reached in 2007, with insurers agreeing to pay out $4.55 billion. This amount was determined by a series of court decisions and was less than what Silverstein had initially sought. The settlement brought an end to the protracted dispute over the insurance payout for the World Trade Center buildings.
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Frequently asked questions
Yes, Larry Silverstein did collect insurance money after 9/11. He received a payout of between $4.5 billion and 4.55 billion.
There is no evidence to support the claim that Larry Silverstein committed insurance fraud. The World Trade Center was insured against terrorist attacks before Silverstein took over the lease in 2001. He was contractually obligated to insure the World Trade Center and purchased an all-risk insurance policy, which included terrorism coverage.
No, Larry Silverstein did not personally enrich himself from the insurance payout. The money was used for the rebuilding of the WTC complex, including the "Freedom Tower."
