You may have heard that the U.S. Second Circuit Court of Appeals last Wednesday decided SR Int. Business Ins. Co. v. World Trade Center Properties, LLC. To be perfectly honest, the case is more or less a rehash of issues the Second Circuit has covered before in related WTC insurance litigation, and consequently it’s a little dull. For some reason, the court’s website doesn’t display a direct link to the case, so you have to click on this link, go to "Decisions" in the left-hand column and find it under October 18, 2006.
The issues in the WTC insurance litigation came down to whether the 9-11 terrorist attacks were one "occurrence" or two. Silverstein Properties had just signed a 99-year lease with the buildings’ owner, the Port Authority of New York and New Jersey, and was in the process of obtaining property insurance when the attacks happened. Actual policies had not yet been issued, only insurance binders, or cursory forms with minimal terms stating only that coverage had begun. The dispute in the litigation was over which policy had actually been agreed to — a policy prepared by Silverstein’s insurance broker, the Willis Agency, or the insurers’ own policies.
Ironically, the definition of "occurrence" in the Willis policy, although written to be pro-policyholder, was more favorable to insurers in these circumstances. Because the definition grouped related incidents as one occurrence, it normally would lead to lower deductibles for the insured, but in cases where losses exceeded policy limits, as in this case, would favor insurance companies. The wording of the insurers’ policies would result in two occurrences, and potentially up to $7 billion in coverage. A jury said most of the insurers agreed to the Willis form, but nine insurers either admitted to being bound by their own forms or the jury found that they were. The court affirmed the jury verdicts.
As long cases go, this one is well-written and is worth a scan for its treatment of the subtleties of contract negotiations and the various definitions of "occurrence." For an incredibly superficial account of this case from the Washington Post, read this. Here’s a one-sided story that, predictably for most journalists, focuses not on what the judges said but on some hot air from politicians.