World Trade Center Developers Were Fully Compensated by $4.091 Billion in Insurance Proceeds, and Thus Cannot Recover Additional Funds from Insurers

On Wednesday U.S. District Judge Alvin K. Hellerstein dismissed on summary judgment a lawsuit by several companies associated with World Trade Center developer Larry Silverstein (the “WTC Developers”) which sought to recover funds from a $1.2 billion settlement between their insurers and several airlines and airport security companies (the “Aviation Defendants”). Applying the same logic from his July 2013 ruling in the trial over WTC Developers’ separate lawsuit against the Aviation Defendants, Judge Hellerstein held that the $4.091 billion in insurance proceeds that WTC Developers had previously received from their insurers fully covered their losses resulting from the September 11th terrorist attacks:

“At the conclusion of the July 2013 bench trial, I held that Plaintiffs did not have any legally recoverable tort damages because they had been fully compensated by their insurance. Thus, it follows that Plaintiffs have no right to the Defendants’ settlement proceeds.”

Background:

In the aftermath of the September 11th terrorist attacks, WTC Developers filed a lawsuit against their insurers seeking to recover over $4 billion in insurance coverage. In 2007 the parties reached a $4.091 billion settlement.

Not long thereafter, the insurers filed tort claims against the Aviation Defendants in a subrogation action, which alleged negligence on the part of the Aviation Defendants. In 2010 the parties settled the subrogation action for $1.2 billion. WTC Developers subsequently sought a declaration that under the terms of their insurance policies WTC Developers were entitled to the $1.2 billion that their insurers had received by settling the subrogation action. In 2012 Judge Hellerstein ruled that under the insurance policies, “Plaintiffs must establish legally recoverable tort damages exceeding their insurance recovery before they can seek recovery of any Defendant’s Settlement Proceeds.”

Meanwhile, WTC Developers proceeded with a separate lawsuit against the Aviation Defendants. Parties disputed whether the $4.091 billion in insurance recoveries that WTC Developers had received from their insurers fully compensated WTC Developers for the same categories of losses that they might have recovered from the Aviation Defendants. In July 2013 Judge Hellerstein ruled that WTC Developers’ insurance recovery “corresponded completely to Plaintiffs’ potential tort recoveries related to the lost value of their leaseholds, and that the insurance recoveries should be set off against such potential tort recoveries, reducing them to zero.”

Following Judge Hellerstein’s decision, the insurers successfully moved for summary judgment in the instant action.