Despite the setback, the construction timetable will not be affected, Mr. Peronne added.

"Yesterday's ruling will not affect the total amount of insurance available to rebuild the World Trade Center, or negatively impact the timetable for construction," he said in a statement.

Planning is well underway for the centerpiece of the WTC, the 1,776-foot tall Freedom Tower, whose design was the subject of a long public and political process. Preliminary sketches have been made for three other buildings on the site.

"If the parties had intended to allow the insureds to take those factors into account--i.e., to build a bigger and better building and thereby recover an additional $700 million--it stretches credulity to suggest they would not have made this understanding explicit," Judge Baer wrote.

Among the insurers were affiliates of Allianz A.G. Holding, St. Paul Travelers Cos. Inc., Swiss Reinsurance Co. and Zurich Financial Services A.G.

Among the changes insurers objected to in plans to rebuild the Freedom Tower were as follows:

o An 18-inch increase in the height of each floor and the addition of nine new floors.

o Addition of a 200-foot "blast wall" to the base of each tower.

o Movement of the new towers outside the original buildings' footprints.

"No American court has ever held that the structural changes of the scale and cost that [Mr.] Silverstein envisions are included in the 'replacement cost,' let alone 'replacement cost' limited by a comparable size, material and quality' clause," the judge wrote.