COVID, Business Interruption and takeaways from the 9/11 lawsuit: An interview with someone who was there

Stephen Dishart served as Managing Director of Corporate Communication and HR for Swiss Re’s Americas Division at the time of the terrorist attack of Sept. 11, 2001. He led the strategic communication team that worked very closely with senior management and legal counsel (both internal and external) as lead plaintiff in a suit filed against the leaseholder of the World Trade Center towers, Larry Silverstein.

It was theorized that Silverstein “placed a bet” that the chances of losing both towers in a loss event would be extremely remote, insuring the pair for only about half of their total replacement value. To get around the underinsurance problem, Silverstein maintained that the terrorist attack constituted two separate occurrences for the purposes of (re)insurance – one event per plane per tower – meaning that while he would have had to pay the deductible twice, he would receive two times the policy limits. The case, with 21 other insurers and reinsurers, sought to have the court declare the terrorist attack as a single occurrence, meaning the policy would only respond once

Swiss Re was the largest insurer of the Trade Center, providing $877.5 million in coverage. After years of litigation and a 13-week long trial, a jury in the U.S. District Court in the Southern District of New York, reached a unanimous verdict in favour of Swiss Re, confirming that the contractual basis of coverage was determined by a policy form know as Wilprop 2000. According to prior decisions in the case, the ruling meant that Swiss Re’s payout obligation was limited to its 25% share of the $3.5 billion loss limit policy.

Glenn McGillivray: As the lead communications person in charge of positioning Swiss Re regarding the Sept. 11 attack, messaging, crisis communication, and so on, can you share some details about your role in the case?

Stephen Dishart: On the morning of Sept. 11, I was in my office on the 44th floor of Park Avenue Plaza at 52nd Street near Park Avenue in Manhattan. When the planes hit and brought down the two towers, the focus from the start was on sympathy and providing help with the human loss and tragedy of the event. Swiss Re had offices near the Twin Towers and many employees who frequently flew in from Zurich and often met with businesses in and near the World Trade Center.

The head of the Swiss Re Americas property and casualty division took charge of locating all of our employees. At the same time, I was given authority from my leadership in Zurich to develop key messages and run the communication. On the 11th, the only statement that came from my office was a verbal response by phone expressing sympathy for victims and families.

As the lead insurer of the World Trade Center, at the time the world’s leading life reinsurer, one of the top two property insurers, and an insurer of airplanes around the globe, we were getting media calls as early as the afternoon of September 11 about the potential financial loss. The reality and the emotions of that day necessitated that the company only commented on the tragedy itself.

That night, however, I drafted a news release that was published on the 12th. The headline and the lead paragraphs were straightforward and focused on the tragedy, not the insurance loss. ‘Swiss Re statement on tragic events in the United States’ read the simple headline. The release expressed sympathy for victims and families and referred to the firm’s longstanding relationships in the U.S.

To satisfy the demand for questions on the potential financial impact of the attack, we stated that the firm could absorb losses from the event, though the economic impact to the firm from the loss would be one of the largest in the company’s history.

For several days, our only response was to provide the release noted. I offered no further interviews, only brief sympathetic comments and I declined to say anything about the financial impact, saying, it was “premature to speculate at this time.” The focus remained on the terror attack itself, particularly the tragic loss of life.

Regarding the litigation that followed, I was part of a core team that included the chairman of Swiss Re’s holding company in the U.S., our global chief legal officer, outside legal counsel, and my New York media relations manager. We worked closely to develop our position statements and manage our communication with all stakeholders. I would say contact was daily, if not, at times hourly or even more often.

Our job was to educate all stakeholders about how an insurance contract works; to define the precedent that would be set by the case and to preserve our reputation, not only in the United States, but internationally.

The case dragged on for some time.

GM: At its height, what did a typical day look like for you and your team?

SD: All sides made filings after filings in the litigation. Briefs had to be read, news releases often coincided with each filing, and certain media covered every move from October 2011 until May 3, 2004, when the jury ruled in Swiss Re’s favour.

The core team was consumed with the case 24/7.

A challenge for me was to make sure the rest of the staff continued with our internal communication, marketing support, events, sponsorships, community relations and the like. The firm was still involved in acquisitions and other important strategic matters requiring close communication support. I spent the very early and very late hours of each day continuing to manage the non-World Trace Center communication, while being focused on the case during the day.

While I lived in the suburbs, I generally spent the week at a hotel a block away from the office. Further, even when traveling, which was frequently to Zurich, my schedule remained the same, except I had to account for a six hour time difference while in Switzerland. This time difference meant that I relied on colleagues both in Zurich and New York to be on call 24/7. International coverage meant that colleagues in all of the firm’s locations around the globe, had access to the public releases to share with the media. Anything beyond a public news release was referred back to my office.

GM: Many companies in similar situations leave the strategy and outreach entirely to their legal team. Why was it critical to have Swiss Re’s corporate communication team work in tandem with the legal team?

SD: I credit our CEO, the Holding Company Chairman, and our Chief Legal Counsel with the understanding that we were in both a litigation fight, but also in a fight to protect our reputation. We made it clear to everyone who would listen, and every time we had the opportunity to explain that, “Swiss Re has always paid legitimate claims.” Swiss Re took the lead in paying losses in the 1906 San Francisco earthquake and was a crucial part of the American economy—paying huge losses for more than a century for floods, hurricanes and other catastrophes in the U.S.

GM: The attack was still very fresh, and the wounds still wide open when the lawsuit was filed and, later, heard. What were some of the challenges that Swiss Re, and your team, in particular, faced as you navigated this very sensitive issue?

SD: Stress and exhaustion impacted everyone involved, but we genuinely believed in our legal case and the critical role we were playing on behalf of the entire industry. If the wrong precedent were set, insurance could have changed for the worse for both the public and business. The case could have turned a new direction for property underwriting for decades. In some ways, it did. First, it was a matter of principle with regard to the sanctity of contracts. Second, members of our leadership and government relations team in Washington advocated for losses related to terrorism. The Terrorism Insurance Act (TRIA) set limits on insurance losses for terrorism, as some events—the worst you can imagine—would be impossible to cover.

To the more personal issue, I think many of those who worked from the moment the planes struck on the morning of Sept. 11, 2001, until the case concluded years later, never had the chance to reflect personally on the tragedy. I don’t want to focus on myself, but I know that on the day of the attacks, I was so busy dealing with both internal and external communication issues that I may not have realized the entire impact. When I learned that a cousin of the man who helped me through multiple phone, computer, and other IT issues that day had died, I stopped. I asked him to go home to his family. His answer was, “There is nothing I can do there. What do you need?”

My own family included four brothers who were all airline pilots at the time. One landed a United flight at JFK not long before the attacks. Others flew for Delta and US Airways, all three airlines were involved. While that was on my mind, there was smoke billowing across the East River that I could see from my office window and employees in Manhattan, and elsewhere, were concerned for their loved ones.

The same was true for the entire staff, as well as our core team and outside counsel. I think those involved in the day-to-day could finally mourn everything: The attacks, the back-and-forth litigation; the extended hours; the time lost with families. Eventually, I think it was a blur, and it has taken many of us a long time to look back and reflect on the loss.

GM: Swiss Re and the other plaintiffs prevailed in the case. Did anything in particular clinch it? How did you feel about the win?

SD: Two things ultimately were irrefutable.

One, there is a phrase in the property form binder that was proffered by Silverstein’s risk managers that was key. The broker, Willis’s insurance occurrence language, made it clear that form prepared by the Willis Group, the Wilprop 2000 form, referred to all losses from a single occurrence “or series of occurrences” within 72 hours as being one loss, i.e., one single event. The case hinged on whether Swiss Re was on the WilProp form or a different form. The jury ruled that Swiss Re was on the WilProp form, and thus, the incident was one occurrence.

Second, I believe that a simple message was one that influenced the general public, the media, and, perhaps, the jurors: “A deal is a deal.” Insurance was purchased for a certain amount, and it was less than what the entire property was worth. Larry Silverstein, head of Silverstein Properties, underinsured the World Trade Center.

Swiss Re spokespeople, a small number of us, said “a deal is a deal” many times over the years of interviews, meetings and litigation. Silverstein had underinsured the World Trade Center, and never expected a total loss. Many banks and other institutions agreed. Even Warren Buffett made this observation quoted by the Insurance Information Institute: “The fact that the industry was providing coverage against terrorist attacks for little or no additional premium is a practice that Berkshire Hathaway president and investment guru Warren Buffett would later deride as ‘foolish’ and ‘a huge mistake.'”

GM: COVID will likely cost the global property and casualty (re)insurance industry a substantial amount in claims. Estimates range from US$30 billion on the low end to more than US$100 billion, worst case. Just how much COVID will cost insurers will depend in large part on whether courts find in favour of plaintiffs who maintain that they should be covered for business interruption. Several parallels can be drawn between the 9/11 case and these COVID-related business interruption lawsuits. What similarities do you think exist between the Silverstein case and the argument that COVID-related BI should be covered?

SD: I think the disputes will come down to the painstaking and challenging task of parsing insurance industry contract language. Consumers and businesses can afford insurance because of language that limits liabilities. For example, if, in the case of the World Trade Center, Silverstein had won the case, would everyone now have to insure against their car being totalled by two vehicles in a parking lot? How much would premiums rise? Perhaps three, four, or five planes had been used? Maybe ten missiles brought the building down? Would Silverstein have been entitled to 10 times the insurance he had purchased?

Precedence is important. It protects the consumer as well as the insurer. If the scenarios above, including the ten missiles, is established as requiring a ten times payout, how would you price car insurance? Do three lightning strikes that sadly burn down a home, necessitate a triple payout to the owner?

With COVID 19, the language will be everything. Business interruption insurance is covered under property insurance contracts, with the expectation that businesses will be closed because of fire, flood, and other physical damage. It’s an important role the insurance industry plays in protecting a business from temporary interruptions in their ability to conduct daily business.

On the other hand, one could dispute whether there was physical damage to the offices, shops, restaurants, manufacturers, and other businesses that were closed because of the pandemic.

GM: Could the defendant (re)insurers take any lessons from the 9/11 suits and apply them to the upcoming COVID BI situation? What are these lessons?

SD: When the decision to litigate is made, understand that your reputation is also on trial.

A good relationship between the chief legal officer and the communication team is essential. Mutual understanding of the purpose of the legal action among the organization’s leadership, the core team, including outside counsel and other essential players makes the difficult days more manageable. Coordination, consistency and setting expectations are all key. Particularly with regard to expectations, you must know going in that you will have both supporters and detractors; like any crisis, M&A, or other types of litigation.

Great challenges throughout the complex litigation provide opportunities for the communicators to educate the public, regulators, judges and juries through concise and clear messages. So having time to put together a strategic plan, develop your two to three key messages and staying on point is key.

Finally, I suggest the communication teams at the insurers, the businesses, the organizations, and everyone impacted, prepare for a long battle. You’re facing months—well, more likely years—of filings, briefs, claims, and counterclaims that will keep you in the trenches for a long time. Getting your position right the first time, being quick to act and on top of each situation that arises will ultimately be best for the litigation and the firm’s reputation.

GM: Anything else?

SD: The company leadership, its lawyers (internal and external), the public relations team, and outside advisors will be pushed to the limit in the post-COVID BI litigation. It’s going to be a long, fierce battle. Try to protect your family or other support groups from the details and the stress.

 Stephen Dishart is a frequent speaker and seminar leader on communications issues, particularly crises and emergency management both in the U.S. and abroad. He teaches both graduate and undergraduate marketing and communications courses at three New York City area colleges. He is President of Dishart Communications and Crisis Management Consultants (www.dishartccmc.com).  More details as well as endorsements of his work can be found on LinkedIn at DishartComms. Stephen can be reached via email at [email protected], and by phone at +1 917-348-1920.