The September 11, 2001 Terrorist Attack and Litigation Aftermath.

Author:Barry, Desmond T., Jr.
 
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Volume 86, No. 2

ON SEPTEMBER 11, 2001, in an unprecedented attack upon the United States, 19 terrorists hijacked four commercial aircraft and purposefully crashed them, causing thousands of deaths and injuries and enormous property damage. Five hijackers seized American Airlines Flight 11, a Boeing 767, which departed from Boston's Logan International Airport bound for Los Angeles, and crashed it into World Trade Center 1 ("WTC 1"), the north tower of the World Trade Center Complex ("WTC Complex") in New York City. Five different hijackers seized United Airlines Flight 175, another Boeing 767, which also departed Logan bound for Los Angeles, and crashed it into World Trade Center 2, the south tower of the WTC Complex. Five more terrorists hijacked American Airlines Flight 77, a Boeing 757, which departed Dulles International Airport bound for Los Angeles, and crashed the aircraft into the Pentagon in Arlington, Virginia. Four terrorists hijacked United Airlines Flight 93, a Boeing 757, which departed Newark International Airport for San Francisco. After the Flight 93 passengers learned of the other hijackings, they attempted to wrest control of the aircraft from the terrorists, and the aircraft ultimately crashed into a vacant field near Shanksville, Pennsylvania.

No passengers or crew members survived the hijackings. The intentional crashes of the aircraft in New York City caused the collapse of WTC 1 and 2, killing thousands more on the ground. A total of 2,977 people were killed as a result of the attack. The collapse of WTC 1 and 2 also caused billions of dollars in property and business interruption damage. The collapse of WTC 1 also caused the collapse of another nearby building, WTC 7.

In the aftermath of the 9/11 terrorist attack, plaintiffs filed wrongful death, personal injury, and property damage and business interruption lawsuits against American, United, their checkpoint security screening companies, 1 non-carriers that had transported terrorist hijackers on another flight on the morning of 9/11, non-carriers who shared check point security responsibility with American and United, municipal airport operators, and The Boeing Company, the aircrafts' manufacturer (collectively "the Aviation Defendants"). Property damage and business interruption plaintiffs included World Trade Center Properties and other companies affiliated with real estate developer Larry Silverstein (the "WTCP Plaintiffs"), who just months prior to 9/11 won a worldwide auction to lease the buildings comprising the WTC Complex for 99 years. Plaintiffs also included insurance companies suing in subrogation for the billions of dollars in property damage and business interruption losses they paid to businesses located in and around the WTC Complex (the "Subrogated Plaintiffs"). The total amount claimed by all plaintiffs exceeded $30 billion, not including prejudgment interest.

The 9/11 Litigation finally concluded in December of 2017. This article examines some of the critical legal issues and decisions that arose during the course of the 9/11 Litigation, including: (1) Congressional response to the 9/11 terrorist attack; (2) the establishment of unique legal principles that governed the 9/11 Litigation; (3) the resolution of WTCP's first-party insurance claims; (4) whether the Aviation Defendants owed a legal duty to ground victims; (5) what evidence would have been admissible if the case had been tried; and (6) the measure of the WTCP plaintiffs' recoverable tort damages. The authors also examine certain 9/11 Litigation defense strategies, and the risks that the named Aviation Defendants and their liability insurers faced in this unprecedented litigation.

  1. The Air Transportation Safety and System Stabilization Act

    On September 22, 2001, only eleven days after the 9/11 attack, the federal Air Transportation Safety and System Stabilization Act ("ATSSSA") was signed into law. 2 The legislation had two primary purposes: (1) to provide compensation to the individual victims of the 9/11 terrorist attack; and (2) to preserve the financial viability of the U.S. airline industry. 3 The ATSSSA created an exclusive federal cause of action for claims arising from the 9/11 attack and required that all such claims be consolidated in the U.S. District Court for the Southern District of New York. District Judge Alvin K. Hellerstein presided over the entire litigation.

    The ATSSSA further provided that each defendant's liability for losses (if liability could be established) "shall not be in an amount greater than the limits of liability insurance coverage maintained by" each defendant. 4 This provision of the ATSSSA was intended to further the goal of "preserv[ing] the continued viability of the United States air transportation system from potentially ruinous tort liability in the wake of the attack." 5 The ATSSSA further provided that "the substantive law for decision in any such suit [arising out of the 9/11 terrorist attack] shall be derived from the law, including choice of law principles, of the State in which the crash occurred unless such law is inconsistent with or preempted by Federal law." 6

    1. The Victim Compensation Fund

    The ATSSSA established the September 11 Victim Compensation Fund ("VCF"), 7 which allowed individual victims of the 9/11 terrorist attack and their families the option of filing suit in the Southern District of New York, or applying for speedier and risk- free relief from the VCF, which was funded entirely by the U.S. Government. A claimant choosing to be compensated through the VCF was required to waive his or her right to file or be a party to civil litigation seeking monetary damages resulting from the 9/11 attack. The right to file a claim for litigation against the terrorists and their supporters who organized and funded the attack was preserved.

    The Attorney General appointed Kenneth R. Feinberg, Esq. as the Special Master of the VCF. Pursuant to the ATSSSA, Feinberg, along with the Department of Justice, promulgated regulations governing the disposition of awards from the VCF. Feinberg developed a matrix for calculating economic losses based on readily identifiable circumstances, such as a victim's age, prior income level, marital status, and the number and age of the victim's dependents. 8 These factors are similar to those used by the laws of most states to determine wrongful death damages. However, the economic loss matrix presumed losses only up to the 98th percentile of individual annual income in the U.S., which at the time was $231,000, thereby implying that awards for decedents with annual incomes exceeding that level still would be limited to compensation based on the assumption that the victim earned only $231,000 per year. The VCF awarded additional amounts for non-economic losses, including care, comfort and companionship, as well as medical expenses, funeral costs, and other losses not considered in the lost income matrix. However, the ATSSSA prescribed that payments to victims and their families from collateral sources such as life insurance must be deducted from VCF awards. 9

    Several plaintiffs filed suit against Special Master Feinberg, claiming that the VCF regulations were arbitrary, capricious, and violated the ATSSSA. Their primary argument was that proposed awards failed to recognize that many of those who died on 9/11 had been earning far more than the Special Master would consider. In Colaio v. Feinberg, 10 the District Court rejected these claims. As an initial matter, Judge Hellerstein held that the ATSSSA provided an "intelligible principle" to guide the Department of Justice and the Special Master in promulgating VCF regulations. The court further held that these regulations were entitled to Chevron 11 deference (i.e., deference given to a government agency's regulations that interpret a statute) because the regulations did not contradict the ATSSSA, and were persuasive in carrying out Congress' intent. In Schneider v. Feinberg, 12 the U.S. Court of Appeals for the Second Circuit affirmed the District Court's Colaio holding.

    The VCF was closed on June 15, 2004. Approximately 98.5% of all eligible claimants pursued their claims through the VCF 13 A total of 7,408 claims were submitted and resolved, resulting in 5,560 awards, worth approximately $7.05 billion.

  2. Whether the crashes of American Flight 11 and United Flight 175 into WTC 1 and WTC 2 were "one or two occurrences"

    In April 2001, WTCP won a worldwide auction to lease the WTC Complex for 99 years from The Port Authority of New York and New Jersey at a total cost of $2.8 billion. 14 In July 2001, WTCP obtained primary and excess insurance coverage for the WTC Complex from approximately a dozen insurers in the amount of $3.5 billion "per occurrence." 15 WTCP and its insurers did not dispute that the losses arising from the destruction of the WTC Complex significantly exceeded $3.5 billion. However, they did dispute whether the crash of American Flight 11 and United Flight 175 into the WTC Complex constituted "one or two occurrences" within the meaning of WTCP's insurance policies.

    WTCP's insurance coverage consisted of a primary layer and 11 excess layers. However, as of 9/11, only one insurer had issued a final policy containing wording that specified the coverage. Accordingly, the court was required to examine the terms of the binders issued by each of the other insurers. Three insurers--Hartford Fire Insurance Company, Royal Indemnity Company, and St. Paul Fire & Marine Insurance Company--issued a form used by the broker Willis. Accordingly, the binder form at issue for those insurers was the Willis "WilProp" form. The District Court analyzed the WilProp form and held that, under its definition of the word "occurrence," the destruction of the WTC Complex was one "occurrence" as a matter of law. 16

    On appeal, WTCP argued that a form issued by Travelers Indemnity Company on September 14 should have controlled...

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