Two recent rulings by a federal judge in New York denying the airlines' bid to dismiss the lawsuit over a narrow insurance dispute have opened the door to the entire case ending up in the hands of a jury.

At issue is whether the two airlines and other defendants should pay additional damages to Larry Silverstein, the leaseholder of the World Trade Center property, beyond what he has already received from his own insurer.

Silverstein's World Trade Center Properties blamed United, now United Continental Holdings Inc (UAL.N), and American Airlines (AAMRQ.PK), for breaches of security. The 2008 lawsuit also named aircraft manufacturer Boeing Co (BA.N), the Massachusetts Port Authority, which manages Logan International Airport, and security companies.

The lawsuit claimed that negligence allowed hijackers to board two planes at the Boston airport and use them as missiles to destroy the 110-story twin towers and cause other buildings on the site in lower Manhattan to burn down. Before September 11, the airlines and the security companies they hired oversaw security at airports and on planes. That responsibility now lies with the Transportation Security Administration, a government agency.

Silverstein is seeking $8.4 billion in damages for loss of property and lost business, even though U.S. District Judge Alvin Hellerstein has limited the amount to the $2.8 billion Silverstein paid for the leases. The lawsuit is among the last pieces of litigation resulting from the attacks of September 11, 2001, which killed more than 3,000 people in New York, the Pentagon outside Washington, and Pennsylvania.

Lawsuits brought by relatives of those killed, people left injured, first responders, cleanup workers and some businesses have been settled.

Hellerstein, who sits in a courthouse less than a mile from the World Trade Center site, has presided over almost all September 11 litigation.

On August 31, he denied the airlines' motion for judgment on whether $4 billion that Silverstein recovered from his insurers more than compensated for the potential damages recovery of $2.8 billion against the airlines, saying it was an issue for a jury to decide at trial. He did not set a trial date.

Last Thursday, he denied the airlines' request for an evidentiary hearing on the same issue.

On Monday, lawyers for World Trade Center Properties wrote a letter to the judge asking him to schedule "an all-issues trial," including the liability of the airlines.

Money was sitting in the accounts of the defendants' insurers earning interest "instead of helping to rebuild the World Trade Center," the letter said.

The aviation defendants' liability insurance is estimated at more than $10 billion, according to court documents. Among dozens of insurers of American Airlines are Associated Aviation Underwriters Inc and Avion Assurance Limited insurance groups. United Airlines has U.S. Aircraft Insurance Group and British Aviation Insurance Group among its insurers.

Andrea Huguely, a spokeswoman for American Airlines, declined to comment. Megan McCarthy, a spokeswoman for United Continental, also declined to comment.

NO DOUBLE DIPPING

Under New York law, if a plaintiff has been compensated for economic loss by a "collateral source" such as an insurance company, the plaintiff cannot recover compensation again in a tort lawsuit.

The airlines argue that Silverstein has already been reimbursed by his insurers well above what he paid the Port Authority of New York and New Jersey for the 99-year lease on the property, just two months before the 2001 attacks.

Donald Mark, an aviation lawyer with Fafinski Mark & Johnson near Minneapolis-St.Paul, Minnesota, said there was a question under the collateral source law of "whether any other payments to the plaintiffs would be double dipping."

Mark, who is not involved in the case, said the judge's ruling "indicated quite clearly that he needs to hear more and I'm assuming there will be a lot of expert testimony."

A new complex to replace the World Trade Center is taking shape. The 16-acre (6.5-hectare) site is owned by the Port Authority of New York and New Jersey, which is rebuilding the complex with Silverstein. The total cost is $14.8 billion. .

Financial services firm Cantor Fitzgerald is also suing American Airlines over lost business and the destruction of its offices in the World Trade Center. The firm said in a court filing last March it was seeking between $464 million and $488.8 million in property damages. American Airlines Flight 11 struck the north tower, killing 658 Cantor employees. United Airlines Flight 175 crashed into the south tower.

The case is in re September 11 litigation, Case No. 21-MC-101, U.S. District Court, Southern District of New York. (Additional reporting by Basil Katz; Editing by Doina Chiacu and Peter Cooney)

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