Twin towers row deepens as Swiss Re set to refuse $7bn insurance claims

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The Independent Online

Larry Silverstein, the US property magnate who owned the World Trade Centre, is heading for a fresh clash with Swiss Re, the main insurer of the twin towers.

He is set to present a formal claim for $3.5bn (£2.4bn) to the international insurance market this week, just over four months after the twin towers were destroyed by hijackers.

Insurers in London and elsewhere will have 30 days to pay up, but Swiss Re is understood to be preparing to refuse to adhere to the deadline, disputing the technical way in which the claim is being presented.

The giant Swiss insurer is already taking Mr Silverstein's company to court over the value of the World Trade Centre policy and the latest stand-off is another tactic to put pressure on Silverstein Properties. Swiss Re wants to make sure Silverstein cannot claim more than the excess value on the policy, which is $3.5bn.

Mr Silverstein contests the towers were destroyed by two aircraft, constituting two events, so he should be able to claim twice on the policy, leading to a potential final claim of $7bn.

All of the insurers who participated in insuring the World Trade Centre dispute this argument, saying that the events of 11 September were one occurrence.

But most, including a number of Lloyd's of London companies, are planning to hand over cash to cover one claim on the policy by the deadline of mid-February because they do not want to escalate the legal action already surrounding one of the biggest-ever property insurance claims. They also want to avoid stirring up negative public feeling in America.

Swiss Re also intends to honour its 22 per cent share of the policy, but will not pay up until Mr Silverstein has given up on his plans to try to make a double claim on the policy.

To justify stalling on paying up, Swiss Re is arguing that Mr Silverstein is trying to claim the money under an insurance provision known as an actual cash value (ACV) clause, while not adhering to the rules surrounding it.

If an insurance policy includes an ACV clause it means that the owner can ask for a fixed sum equal to the value of the destroyed property up-front and does not have to rebuild it. Mr Silverstein has not officially stated that he will not rebuild the towers but is widely thought to have ruled it out.

Claiming under an ACV clause would suit Mr Silverstein, who wants to be able to recover a large sum as quickly as possible because he is under pressure to repay debt to bondholders who loaned him the money to buy the twin towers two months before they were destroyed.

ACV clauses do not normally allow companies to carry on negotiating about the final sum they are to receive for their loss. Yet Mr Silverstein is trying to get $3.5bn up front while at the same time preparing to take legal action to force the insurers to pay the rest.

Jacques Dubois, the chairman of Swiss Re America, said: "As many as 21 insurers think that the ACV clause is defined our way." Mr Dubois would not comment on whether he expects formal notification of the Silverstein claim this week.

But he said the company was pressing ahead with its own court case against Silverstein to try to get legal backing for its position. A date for a hearing in the New York district court has not yet been set.

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