Why Two Airlines Are Still Fighting 9/11 Lawsuits

Larry Silverstein, president and chief executive officer of Silverstein Properties Inc in 2011 Photograph by Scott Eells/Bloomberg

A dozen years after the Sept. 11 terrorist attacks, litigation continues against the two airlines whose planes were hijacked and crashed into the World Trade Center. The main reason? Lots of insurance money remains at stake.

A federal judge ruled this week that New York real estate developer Larry Silverstein can’t pursue $3.5 billion from American Airlines’ parent, AMR Corp., and United Airlines over the destruction of the Twin Towers in 2001. “If this case were to go forward, the WTC companies would not be able to recover anything against the airlines,” U.S. District Judge Alvin Hellerstein said Thursday.

Silverstein’s World Trade Center Properties plans “an immediate appeal,” said Bud Perrone, a spokesman for the company. “We will not rest until we have exhausted every option to assure that the aviation industry’s insurers pay their fair share toward the complete rebuilding of the World Trade Center,” Perrone wrote today in an e-mail.

Silverstein leased the towers in 2001 and collected $4.1 billion from insurers in a 2007 settlement. The following year he sued the airlines along with Boeing and the Massachusetts Port Authority Board, which operates Boston Logan International Airport, the point of departure for the two hijacked Boeing 767s that crashed into the towers. The developer maintains that the insurance money he has already received does not preclude his company from collecting further damages from the lawsuit; the WTC properties had been insured for $3.5 billion at the time of the attack.

The four flights hijacked on Sept. 11 were each covered by about $1.5 billion in insurance, leaving plenty of funds after victims of the attack settled for about $500 million in January 2011, says Mary Schiavo, an aviation attorney who represented victims families in the lawsuits. “The passengers did not eat up all the insurance. There’s still money there.”

Ten days after the attacks, amid worries that the airline industry faced imminent collapse, Congress limited airlines’ liability for the hijackings and mandated that any damages were to be collected from insurers and capped at the amount that covered the four flights, or roughly $6 billion. The bailout package, which had heavy bipartisan support and was signed quickly by President George W. Bush, also gave U.S. airlines $5 billion in cash and $10 billion in loan guarantees to help stabilize the industry. Taxpayers funded the higher insurance premiums U.S. airlines faced into 2002.

Schiavo says Silverstein faces a legal hurdle because he has already collected insurance payments for the attacks. Still, she says, his case has merit in trying to make the airlines accountable. “If I [were] them, I would go forward and finish it up, absolutely,” she says of Silverstein.

Even if Silverstein’s legal pursuit of the airlines ended, another lawsuit from the terrorist attacks would still be outstanding. Cantor Fitzgerald, the financial firm that lost 658 employees in the destruction of the north tower by American Flight 11, is seeking damages from the airline. The trial is expected to begin in January in Hellerstein’s court. The judge limited (pdf) the amount of damages the firm can seek in a 2011 ruling. The initial claims topped $1 billion.

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