Billion Dollar Documents Back in Court

What's the price of an ambiguous insurance contract? About a billion dollars in the case of Larry Silverstein's policy over the World Trade Center's Twin Towers. That's a billion good reasons to get the fine print right.


One or two events that changed the world

Silverstein, the holder of a 99 year lease over the Twin Towers, and a syndicate of insurers that agreed to cover the property, were back in court this week, with both sides continuing their fight over the question whether the September 11 attack on the buildings was one event or two. If the two planes were a single incident, the insurers pay one amount. If the two planes were two separate incidents, the insurers pay a larger amount. The difference? Over a billion US dollars.

The problem? At the time of the attack, the parties had not clearly agreed which policy wording should apply.

In 2004, one jury decided that insurers who had agreed the Wilprop form could rely on wording that defined the attack as a single event. Another jury decided that insurers who didn't agree the Wilprop form were required to pay out on two events.

Now, both side are appealing.

It pays to get the fine print right.

Cronyism on Steroids?

When it was discovered that only four out of sixty contracts signed with a pair of external consultants went out to tender, New Zealand MP Murray McCully accused the Health Ministry of "cronyism on steroids". Now he reckons the Auditor-General's report on the matter portrays a saga of "incompetence on a monumental scale".


Tell us what you really think, Murray.

The Report doesn't paint a pretty picture of procurement policy compliance within the Ministry. Amongst Auditor-General Kevin Brady's many findings are these gems:

• Most officials did not have a copy of the procurement policy.
• Most officials were somewhat vague as to where they might locate a copy.
• There was a general lack of awareness among officials as to what the policy actually required.

What conclusions can we draw from all this? Perhaps the obvious one is that producing a nice fat policy on something is no guarantee that anyone will follow it.

So how do you get people to follow procurement policy?

Despite making 17 recommendations for improvement, the Auditor-General missed one obvious point. That making people aware of a policy is still no guarantee they will follow it. This is particularly true when the policy is long and complex, and the time available to learn and understand it is limited. Another approach, and one which some government agencies are starting to adopt, is to develop procurement systems that guide users naturally toward compliant outcomes.