When we were talking about Hours Clause in CAT XL, we talked about “Number of Occurrences” and its impact on both the Limits as well as deductibles.

This case study on “Number of Occurrences” comes from direct market and not from the reinsurance market. This is regarding the terrorist incident at the World Trade Center in 2001 in US.

Larry Silverstein- signed 99 year lease on WTC complex in June 2001 with Port Authority of New York & New Jersey.
Virtually all insurance policies sold in US before 9/11 had no terrorism exclusion and coverage was almost free since terrorism risk was considered so remote.
Covered for USD 3.55 billion per occurrence. 25 insurers participated in policy.

Broker slip had occurrence definition as:
“all losses or damage that are attributable directly or indirectly to one cause or to one series of similar causes.”

Some insurers participating in the policy objected to above definition. Some were in agreement. Discussions were still on till Sept 11, 2001. Policy was not yet issued.

One terrorist flew a plane and hit WTC 1. Few minutes later another terrorist flew another plane and hit WTC 2.

The total loss was over USD 10 billion.

Insurers were saying it is one occurrence and were ready to pay USD 3.55 billion. Larry Silverstein argued it is two occurrences and asked for USD 7.1 billion.

Finally it went to Court and court awarded USD 4.55 billlion.

Please research why the court awarded neither 3.55 or 7.1 billion but a number in-between? Comment after research.