Mr. Silverstein is contending that the Sept. 11, 2001 terrorist action that destroyed the WTC was two insurable events, thereby doubling the amount of coverage that insurers say was in place.

During the trial's first week, WTC risk manager Robert Strachan testified that–in what he described as an accident–he had twice faxed copies of the Willis Property form (which defines the WTC claim as a single event with a $3.5 billion limit) to let lenders and others know the extent of coverage. Mr. Strachan said when he sent the faxes a day after the Sept. 11 attack, he was “upset and confused” and he faxed that form because “it was the only policy I had in my office” at the time.

But last week, attorneys for the insurers were allowed to introduce notes, made on the day the faxes were sent, by Beth Ann Herrmann, director of insurance operations for GMAC, a major lender for Mr. Silverstein.

Ms. Herrmann's notes described her conversations that day with one of the fax recipients–Peter Lefkowitz, a GMAC insurance representative who also spoke with Mr. Strachan on that day. Her notes read, in part: “Bob Strachan faxing manuscript form that it [the policy] was to be written on” and “Lloyd's [one of the insurers represented in the trial] accepted the policy form.”

Those notes appear to support the contention of insurers that they are bound to agreements based on the Willis Property form (also called the “Wilprop” form) rather than a Travelers property form that would support Mr. Silverstein's contention that two airplanes crashing into the Twin Towers constitute two occurrences for insurance purposes. Final policy documents were not signed before the Sept. 11 terrorist attack.

Ms. Herrmann, on the witness stand a few weeks ago, said that despite her extensive notes, she couldn't remember her Sept. 12, 2001 conversation with Mr. Lefkowitz or the contents of the meetings and discussions she participated in immediately after Sept. 11. At the time of her testimony, her notes were not allowed in evidence.

Judge Mukasey told jurors that Ms. Herrmann had, “as she put it, no present recollection of that conversation, but she testified that she took notes of what Mr. Lefkowitz told her. And Mr. Lefkowitz testified that he conveyed truthfully what Mr. Strachan had told him. So, what you are seeingis Ms. Herrmann's notes of that conversation.”

Judge Mukasey also told lawyers that one of the reasons Ms. Herrmann's notes were now admitted as evidence was because her mind had been “messed with” by Mr. Silverstein's attorney before she testified. Her notes “are in [evidence], in part, because Beth Ann Herrmann's mind got messed with, and the record is clear on that and explicit–that's part of the reason those notes are in,” the judge commented.

But Herbert Wachtell, the lead attorney for Mr. Silverstein, challenged the judge's characterization of Ms. Herrmann and said that her memory lapse was caused by a common “psychological phenomenon” which can occur when people are busy taking notes without listening to the content of the conversation.

“If we ever had to go into the issue of why there was a lack of recollection of Beth Ann Herrmann, I would like to do it by bringing a psychologist in,” Mr. Wachtell told the judge. “It's the psychological phenomenon that afflicted Beth Ann Herrmann, not anybody tampering with her.”

In other action at the trial, Mr. Silverstein's attorneys continued to attack insurers' one-event argument. In a cross-examination of underwriters from Lloyd's syndicates, lawyers representing Mr. Silverstein noted that Lloyd's underwriters had waived their right to change the wording on the slip and agreed “to abide by and accept decisions of the lead underwriter with respect to underwriting, policy administration and claims,” and that Mr. Silverstein's broker–Willis Group Holdings–was allowed to pick the lead underwriter.

“Is it your position that this provision designating an unspecified insurance company as the lead underwriter and Faraday [a Lloyd's syndicate] agreeing to abide by and accept decisions of that lead underwriter was part of what Faraday bound to?” Mr. Silverstein's lawyer, Peter Hein, asked Nick Jones, a Faraday underwriter, who took the stand last week. “There is no limitation at all in this provision as to who may be the lead underwriter, correct?” he continued.

However, Mr. Jones replied: “This is a draft form–it's clearly not finalized,” adding that Wilprop was the only policy form he was ever shown. Mr. Jones added that those waiver clauses only apply to the final policy document, which wasn't signed before the Sept. 11 terrorist attack.

Mr. Jones also contended that Willis wasn't free to change the wording or form that accompanied the binder. “I believe the final wording would be based on the wording that I was shown in the underwriting submission. And therefore, if that had changed, I would have expected the broker to bring that back,” Mr. Jones said.

Neil Chapman, the underwriting director with Wellington, a Lloyd's syndicate, also testified under cross-examination from Mr. Hein that “we waived the agreement, provided it did not alter materially from what was contained in the submission and the slip.”

As the trial continues, there will be plenty more fireworks in coming days.

In what could turn out to be the beginning of blockbuster testimony, there are now talks circulating in the courtroom that the person at the epicenter of this entire dispute, Larry Silverstein, may take the stand later this week or next. Also this week, jurors will hear from some of the U.S. insurers that participated in the WTC coverage program.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, March 12, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved. Copyright in this article as an independent work may be held by the author.