Clyde & Co finds quick-fix solution for WTC claims

A unique scheme has been drawn up by Clyde & Co to resolve quickly the hundreds of reinsurance claims arising out of the destruction of the World Trade Center (WTC) – totalling an estimated $45bn (£28.7bn) – that are soon to reach the London market .
The firm’s senior partner Michael Payton is responsible for the scheme, which has been welcomed by the insurance and reinsurance market in the US and the UK. He has recruited former Law Lord, Lord Mustill to oversee the reinsurance claims. He will be the lead evaluator alongside a panel of judges.
Payton has adapted existing regulations governing so-called ‘evaluations’ – an increasingly used aspect of alternative dispute resolution – to handle the mammoth number of WTC-related reinsurance claims. There are estimated to be $50bn (£31.9) of insurance claims relating to the loss of the WTC, nearby buildings, business interruption and fatalities.
Payton needed a less orthodox way of settling the reinsurance disputes than going through the courts, which will leave insurers without a chance of recouping from reinsurers for around 18 months after their claims are lodged.
He told The Lawyer: “The negotiations need to be sorted out quickly. Mediations are quick but they lack authority [in terms of being authoritative in relation to similar claims], so the re-reinsurers could say to the reinsurers that they should not have paid out in the first place. We need something that combines speed, which the insurer needs, and authority, which the reinsurers need.”
Under Payton’s scheme, parties will put their arguments on paper before the evaluator who will deal with cases by either a one or two hour meeting, or on the basis of documentary rather than oral evidence. The evaluator will decide the outcome, which will not be binding on either party. This is different to mediations, in which the evaluator conducts and encourages negotiations. The scheme – named ‘early neutral evaluation’ – was welcomed by US insurers during a recent presentation of the proposal in California.
Lord Mustill will add strength to the scheme because of his international reputation in alternative dispute resolution work and insurance matters.