Insurers Not Bound
On Specific Form

April 1, 2004 -- NEW YORK -- London insurers signed temporary binders to provide coverage on the World Trade Center based on no particular policy form, a London broker told a federal court Thursday.

Henry Lawrence, a broker at Willis Group Holdings' London office, told the court he didn't believe the insurers paid any attention to the WilProp policy form that was attached to the underwriting submission when they signed slips - or binders - to provide coverage in July 2001 for the New York City landmark.

Lawrence said he doesn't even remember bringing the WilProp form with him when he sought coverage from several Lloyds of London syndicates, including Wellington, Faraday and Ace Global.

However, Lawrence found himself on the hot seat as attorneys for the insurers pulled out deposition testimony and other witnesses' testimony that disputed this claim.

The testimony came during the trial between World Trade Center leaseholder Larry Silverstein and more than a dozen insurers providing coverage on the Twin Towers. At issue is which policy form was in effect when the prestigious property was destroyed on Sept. 11, 2001.

Silverstein is vying to have the plane attacks declared two separate events, entitling him to two payments of $3.55 billion, while the insurers argue it was a single event, limiting him to a single payment. The wording on the policy form will ultimately determine if the tragedy is deemed one event or two.

Lawrence told the court he disagreed with the underwriters' contention that the slip was "inextricably linked" to the WilProp form. (The WilProp form was part of the original submission sent out to insurers and views the terrorist attacks as a single event). Lawrence said the slip by itself bound the insurers, and he contended that the WilProp form was irrelevant and not part of the binding agreement.

However, Lawrence began to backpedal slightly when the court saw that key information - such as the name of the insured parties and even the names of the properties covered - was not listed on the slip. However, this information was listed on the WilProp form.

"Sir, if you had a loss with this slip in place, you would have to look at the underwriting submission (which includes the WilProp form) to determine whether the building that had been damaged was insured under the placement, wouldn't you?" asked attorney Ken Erickson, who represents the London insurers.

Lawrence shuffled papers uneasily and admitted, "You'd have to look outside the slip."

Lawrence told the court he couldn't remember if he had ever shown the WilProp form to the insurers when they signed binders. However, the court was shown copies of a WilProp form, in which several London insurers - including one that Lawrence had signed up - had stamped their names on the corner, indicating they had read the form.

Erickson then tackled Lawrence's contention that the insurers were not bound by any particular form because they signed slips that contained the clause "agreeing of wording waived."

Erickson asked if Lawrence had ever heard of a previous situation where an insurer was bound by no form at all when a loss had occurred prior to the final insurance documents being drawn up.

Lawrence replied that he'd never personally encountered such a situation and admitted he wasn't sure if the underwriting submission - which includes the WilProp form in this case - would then govern.

Swiss Reinsurance Co.'s attorney, Barry Ostrager, then grilled Lawrence over the issue of "coinsurers." Lawrence told the court that no policy form would be in effect until the "coinsurers" in the insurance coverage agreed to the wording on a form. Ostrager pulled out Lawrence's deposition testimony where he testified that he had told a Wellington underwriter that Swiss Re would be one of the coinsurers that would have to agree to the final wording. When asked about this on the stand Thursday, Lawrence said he couldn't recollect the conversation.

"You deny it?" asked Ostrager.

"Not categorically. What I'm saying is I don't remember having the conversation one way or another," replied Lawrence.

Ostrager then read back testimony from the Wellington underwriter, Neil Chapman, who also confirmed the conversation. "Does that refresh your recollection?" he asked.

"No, it doesn't. That is Mr. Chapman's recollection," said Lawrence. "I have no clear memory of whether that topic of conversation came up in my negotiations with Mr. Chapman."

Ostrager then asked Lawrence if Silverstein's lawyers had coached him about the meaning of the phrase "I don't recall."

After a slight hesitation, Lawrence quipped, "I was going to say I don't recall," to which the courtroom erupted into laughter. But Lawrence then said he did remember that Silverstein's team did talk to him about "levels of ambiguity, which was a rather odd conversation."

The afternoon testimony revolved around two other two other insurance underwriters - Douglas Johnson from Royal Specialty, and Louis Esposito from Zurich.

Johnson told the court that the Silverstein broker, Harold Tucker, never specifically told him that the WilProp form would be the policy form and he acknowledged never having reviewed the form prior to Sept. 11. However, he said he assumed WilProp would be the operative form since it was the form that had been sent in the original submission documents.

"Is it the practice of Royal to agree to bind to a manuscript form without receiving and approving it?" asked Silverstein attorney John Gross.

"Yes," replied Johnson.

"You do?" asked Gross. "Yeah," answered Johnson.

Gross then produced a document that showed Johnson had specifically named another form - "ISO" or Insurance Services Office form - on the slip. The ISO form - unlike the WilProp form - does not define the word "occurrence," thereby leaving the door open for the plane attacks to be two events and two payouts.

Johnson said the "ISO" form was accidentally inserted in the form space when he was using an "automated quote system" to fill out the binder. He said "ISO" was the only option the system offered for a manuscript form.

"I never intended ISO to be used on this (insurance) program," Johnson said.

Later, Esposito, a senior underwriter for Zurich, took the stand. Esposito told the court he believed his company signed a binder based on the WilProp form, and said he "went through" the form quickly when it was first submitted.

However Silverstein attorney Barbara Robbins pulled out his deposition testimony where Esposito testified he had never read the WilProp form. Esposito told the court he misinterpreted the question originally, and that he "read" the form, but had not conducted a formal "review" of it.

Under further questioning though, Esposito admitted he never got around to doing a formal review of the form even after binding coverage.

Robbins also read back Esposito's deposition testimony where he said someone had told him - prior to Sept.11 - that the WilProp form would not be used.

"Did you give that answer?" asked Robbins.

"Yes," replied Esposito.

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