There are stories that seem like an urban legend because they fit too well with a movie script: a contract signed at the last minute, an invisible risk that no one wanted to look at in the face, and finally an event that changes everything. That’s why the story of an investor who decided attack to a ruinous business, it does not seem real, and the truth is that it was.
A contract changed its meaning forever. In July 2001, the businessman Larry Silverstein signed the rent or lease at 99 years of the iconic World Trade Center complex, a deal then valued at around $3.2 billion that gave it operational control of a global symbol.
Everything was more or less normal if it weren’t for the fact that a few weeks later 9/11 arrived and that business movement became a almost impossible story to tell without it sounding like a script: the “greatest real estate trophy” in Manhattan became the epicenter of the largest attack on American soil, with all that it implied in losses, contractual liability and clash with the State, public opinion and, above all, insurers.
A ruinous business. The World Trade Center was not just any building, it was a logistical monster with expensive maintenance, complex technical decisions and a typical legacy of the great construction of the 20th century: asbestos, used for years as part of “fireproofing” projected onto steel and other materials, and which ended up being a problem health and economic huge for countless homeowners.
In the case of the Towers, the use of materials with asbestos in construction phases, especially on the ground and middle floors of the North Tower, and that reality turned any renovation into a minefield of costs, controls and legal risks. In practice, the iconic value coexisted with an asset that was difficult to manage: expensive to maintain, delicate to intervene and with a liability that forced us to think about insurance as if it were part of the structure.
Larry Silverstein
The key insurance. When the complex collapsed, the debate stopped being “what happened” and became “what exactly does what was signed cover”, and there appears the detail that explains years of judicial war: at the time of the attack not all the definitive policies were closed, and part of the coverage rested on preliminary documents and debatable conditions.
This allowed insurers cling to certain definitions and Silverstein to argue that the contractual framework should be read in the way that most protected its financial position. It was not a theoretical discussion, it was the difference between being ruined or having the resources to continue, rebuild and politically survive the earthquake that came after the disaster.
The war of a word. The heart of the case was whether 9/11 counted as a single insured event or as two different events, since two planes and two towers were impacted. Silverstein defended that the terrorist attack was actually two attacks separated and, therefore, two events, one in each insured building, which justified aiming for figures close to double the “per occurrence” limit.
The insurers, on the other hand, tried to fix it as a single event so as not to duplicate the exposure. The courts did not leave a clean and single ending, but rather a panorama divided into blocks: for some sections and insurers, interpretation was imposed of “an occurrence”and for others the door was opened to consider it two, creating a possible high compensation ceiling, but not necessarily automatic.
The final amount. In the popular narrative it has been repeated that the man “tried to charge double” and that is essentially true, because his claims came to be raised in the around 7,000 million of dollars under the logic of two events.
It turns out that the real framework was narrower: the total coverage “per occurrence” (building) moved around of the 3.2–3.5 billion and the litigation was cutting, distributing and limiting the maximum exposure according to which insurers fell under which definition. In practical terms, the story was not “he got paid twice and that’s it,” but rather that “he fought for two, partially won, and the system left him in a middle ground” that for years became in the great suspense Financial of Ground Zero.
The big deal. After almost six years of battle and litigation, the outcome that mattered above the headlines was reached: an extrajudicial agreement of no less than 2 billion dollars with seven insurers announced with the intervention of the governor of New York, Eliot Spitzer, and the state superintendent of insurance, Eric R. Dinallo.
That pact was presented as closing all claims pending and, above all, as the elimination of the last great barrier so that the publicized reconstruction of the complex could advance without the permanent brake of judicial uncertainty. Beyond the number, the key was the effect: resources and clarity to fulfill obligations and continue building in a place where each delay was a political, economic and symbolic problem at the same time.
How it was distributed. The agreement was not a single check with a single destination, because in the same two actors lived together: the Port Authority as the public owner of the site and Silverstein himself as the private tenant and developer.
The agreed distribution left approximately 56% for Silverstein and 44% for the Port Authority, and a direct implicit message: it was not about “getting rich” in a conventional sense, but about sustaining a project that had been tied to contracts, commitments and reconstruction. Furthermore, the confidentiality about how much each insurer paid separately reinforced the typical idea of these endings: a functional closure to be able to turn the page and (re)build.
The real story behind the myth. I counted ago a few years Snopes all the hoaxes that were given around the fascinating Silverstein story. Legend often tells it as an almost obscene stroke of luck, but the reality is more uncomfortable: Silverstein signed a huge lease just before the disaster, yes, but from then on he was trapped in a labyrinth of incomplete policies, legal definitions and years of litigation in which the outcome depended on technicalities that could sink any project.
Of course, fortune existed in the sense that there was insurance and that legal means made it possible to collect, but the true story is not so fascinating: it was a long, exhausting and expensive fight, one where the word “occurrence” had never cost so much (literally, billions) and where the end was imposed, not because it was epic, but because without an agreement it was impossible to build again and for the wheel of money to continue running.
Image | Mariordo (Mario Roberto Durán Ortiz), UJA-Federation of New YorkTodd Rengel, rds323, Sander Lamme
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