Alyssa Lane
Larry Silverstein, an American businessman, signed a 99-year lease for the World Trade Center complex in July 2001, two months before the 9/11 terrorist attacks. Silverstein also took out an insurance plan that covered terrorism. After the attacks, Silverstein claimed he should receive double the payout because there were two separate attacks. This sparked a multi-year dispute with insurers over whether the attacks constituted one or two events, with the insurance policy providing a maximum of $3.55 billion per event. A settlement was reached in 2007, with insurers agreeing to pay $4.55 billion, though sources vary on the exact amount. Silverstein's insurance payout has been the subject of various conspiracy theories and speculation.
| Characteristics | Values |
|---|---|
| Name of leaseholder | Larry Silverstein |
| Date of signing the lease | June or July 24, 2001 |
| Duration of the lease | 99 years |
| Amount paid for the lease | $3.2 billion |
| Insurance coverage | Terrorism |
| Insurance payout | $4.55 billion, $4.6 billion or $4.8 billion |
| Insurance claim | Two separate incidents |
| Court ruling | One incident |
| Settlement | $4.55 billion |
| Use of insurance payout | Redevelopment of the World Trade Center site |
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What You'll Learn
Larry Silverstein's insurance policy
Larry Silverstein, an American businessman, signed a 99-year lease on the World Trade Center complex in June 2001, two months before the 9/11 attacks. Silverstein took out an insurance plan that covered terrorism, and after 9/11, he took the insurance company to court, arguing that he should receive double the payout because there were two separate attacks.
The insurance policy for the World Trade Center buildings 1 WTC, 2 WTC, 4 WTC, and 5 WTC had a collective face amount of $3.55 billion per event. Silverstein and his insurers engaged in a protracted dispute over whether the attacks constituted one or two events. A settlement was reached in 2007, with insurers agreeing to pay $4.55 billion, less than the $8 billion Silverstein had hoped for.
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 these entities had a say in the insurance coverage and benefited from the insurance payouts.
The proceeds from the insurance policies were used to rebuild the World Trade Center site, including the famous "Freedom Tower." Silverstein retained the rights to build three office towers: 150 Greenwich Street, 175 Greenwich Street, and 200 Greenwich Street. However, he ceded his rights to building One and allocated a portion of the insurance proceeds to its rebuilding.
The insurance situation surrounding the World Trade Center attacks had a significant impact on commercial insurance policies and transformed the way they work.
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Terrorism insurance
There were rumors that Larry Silverstein, the leaseholder of the World Trade Center, bought terrorism insurance two months before 9/11 and then collected double its value on the grounds that there were two attacks. However, this narrative assumes that the World Trade Center did not have terrorism insurance before Silverstein took over. In reality, Silverstein 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 say in insurance coverage. Additionally, Silverstein was contractually obligated to insure the World Trade Center when he signed the lease, and virtually all commercial insurance policies sold in the U.S. before 9/11 covered terrorist incidents.
The 9/11 attacks cost the insurance industry $59 billion in losses, making reinsurers cut back on their terrorism coverage or stop offering it altogether. This led to the Terrorism Risk Insurance Act of 2002, which established a three-year Terrorism Insurance Program in the Department of the Treasury to pay the federal share of compensation for insured losses resulting from acts of terrorism. The Act also mandated insurer participation in the Program and set forth a transition period from January 1, 2003, to December 31, 2005, during which insurers had to make available coverage for insured losses in all property and casualty insurance policies.
The Terrorism Risk Insurance Act of 2002 has been reauthorized multiple times, with the most recent reauthorization in 2019 extending the program through December 31, 2027. The 2019 reauthorization also requires the Secretary of the Treasury to evaluate the availability and affordability of terrorism risk insurance and the U.S. Government Accountability Office to conduct a study on cyberterrorism risks. These efforts reflect the ongoing commitment to making terrorism insurance available and affordable for businesses and individuals.
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The 9/11 attacks as one or two events
On September 11, 2001, the United States of America experienced the deadliest terrorist attacks in its history. The World Trade Center in New York City, the Pentagon in Washington, D.C., and a field in Pennsylvania were the sites of these attacks. The attacks were perpetrated by 19 terrorists associated with al-Qaeda, 15 of whom were from Saudi Arabia.
The 9/11 attacks involved four hijacked planes. Two planes crashed into the Twin Towers of the World Trade Center, one struck the Pentagon, and the fourth crashed in a field in Pennsylvania. The North Tower was hit first at 8:46 a.m., with the South Tower being struck at 9:03 a.m., demonstrating that these were deliberate acts of terrorism. The attacks concluded with the fourth plane crashing in Pennsylvania at 10:03 a.m., as all attackers were dead and the hijacked planes destroyed.
The 9/11 attacks were a series of coordinated strikes, but the question arises as to whether they constitute one or two events from an insurance perspective. This issue was central to the dispute between Larry Silverstein, the leaseholder of the World Trade Center, and his insurers. Silverstein had purchased terrorism insurance two months before 9/11, and he argued that the attacks constituted two separate events, entitling him to double the insurance payout.
The insurance policies for the World Trade Center buildings had a collective face amount of $3.55 billion per event. Silverstein and his insurers engaged in a protracted legal battle, with a settlement reached in 2007. The insurers agreed to pay out $4.55 billion, which was less than what Silverstein had sought. This resolution took into account the interpretation of the attacks as one or two events and the complex insurance arrangements involving multiple stakeholders.
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Legal proceedings
Larry Silverstein, the leaseholder of the World Trade Center, was involved in various legal proceedings after the 9/11 attacks. One notable dispute was with his insurers over whether the attacks constituted one event or two under the terms of the insurance policy. Silverstein argued that each plane crash counted as a separate terrorist attack, which would entitle him to a higher payout. The insurance policy had a maximum coverage of $3.55 billion per event.
Silverstein's decision to purchase terrorism insurance shortly before the 9/11 attacks raised suspicions that he had foreknowledge of the impending attacks. However, it has been pointed out that such insurance coverage was standard in commercial insurance policies before 9/11 and that Silverstein was contractually obligated to insure the World Trade Center when he took over the lease. Additionally, Silverstein was not the sole decision-maker, as he led a consortium of investors and lenders who had a collective say in the insurance coverage.
The dispute with insurers over the amount of coverage for rebuilding World Trade Center buildings 1, 2, 4, and 5 resulted in a protracted legal battle. A series of court decisions ultimately determined that a maximum of $4.55 billion was payable, and settlements were reached with the insurers in 2007.
Silverstein was also involved in legal proceedings with the Port Authority of New York and New Jersey. In July 2006, they jointly filed a lawsuit against some of their insurers, alleging that the insurers refused to waive certain requirements of the insurance contracts. This litigation was settled in May 2007, along with other federal lawsuits and appraisals.
Silverstein yielded some of his rights back to the Port Authority in April 2006 to facilitate the rebuilding process. He ceded his rights to building One and allocated a portion of the insurance proceeds to its reconstruction. In return, the remaining funds were allocated to Silverstein Properties for rebuilding the remaining buildings.
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Payout and settlement
Larry Silverstein, the leaseholder of the World Trade Center, bought terrorism insurance two months before 9/11. After the attacks, he sued the insurers, claiming that he should be paid double the insurance amount because there were two separate attacks. This kicked off a multi-year dispute, with Silverstein arguing that the attacks constituted two events under the terms of the insurance policy, which provided for a maximum of $3.55 billion coverage per event.
The insurers, on the other hand, maintained that 9/11 was a single event. The dispute was finally settled in 2007, with insurers agreeing to pay out $4.55 billion, which fell short of the $7 billion that Silverstein had sought. This settlement amount was reached through a series of court decisions and included payouts from lawsuits against American Airlines and United, won in 2010.
Silverstein used the insurance payments towards the redevelopment of the World Trade Center site, including the famous "Freedom Tower". However, the proceeds from the insurance policies were insufficient to cover the cost of rebuilding all the insured buildings, and he had to allocate a portion of the insurance proceeds to rebuilding One World Trade Center in favour of the Port Authority.
In addition to the insurance payouts, the United States Congress approved $8 billion in tax-exempt Liberty Bonds to fund development in the private sector at lower-than-market interest rates. Silverstein also retained the rights to build three office towers as part of the rebuilding effort.
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Frequently asked questions
Yes, Larry Silverstein took out an insurance plan that covered terrorism two months before 9/11.
Yes, Larry Silverstein tried to claim double the insurance payout after 9/11, arguing that the two plane crashes were two separate incidents.
No, Larry Silverstein was not paid double the insurance payout. After a protracted dispute, a series of court decisions determined that a maximum of $4.55 billion was payable, and settlements were reached with the insurers in 2007.
Larry Silverstein acquired the World Trade Center for $3.2 billion and received an insurance payout of $4.55 billion after the 9/11 attacks. However, the proceeds of the insurance policies were insufficient to cover the cost of rebuilding all the insured buildings. Therefore, it is unclear if Larry Silverstein profited from the 9/11 attacks.
