World Trade Center Properties, L.L.C. v. The Travelers Indemnity Company

Facts

At issue is the amount of insurance that is recoverable for the total destruction of the WTC that occurred after the buildings were struck by aircraft that had been hijacked by terrorists. The parties do not dispute that the destruction of the WTC resulted in a loss that greatly exceeded $3.5 billion. One of the WTC insurers, plaintiff-counter-defendant-intervenor SR International Business Insurance (SR International), filed suit against D 'seeking a judicial declaration of its rights and obligations to all of the insureds under the policy' and a 'declaration that the damage to the World Trade Center is one insurance loss.' D subsequently filed counterclaims against Ps, seeking a declaration 'that the events of September 11th constituted more than one occurrence under the coverage that the counterclaim-defendant[s] agreed to provide to Ds.' As a condition of its 99-year lease of the WTC, D was required to obtain first-party property insurance on the property. D engaged Willis of New York (Willis), an insurance broker, to set up a multi-layered insurance program, which consisted of a primary insurance layer and 11 excess insurance layers providing a total of approximately $3.5 billion insurance on a 'per occurrence' basis. Willis circulated a Property Underwriting Submission (Underwriting Submission) containing information regarding the proposed placement, including descriptions of the property and the insureds, desired coverage terms and conditions, estimated property values, engineering information, and a property loss history. With respect to at least the four Ps involved in these appeals, the Underwriting Submission also included a specimen copy of Willis's own 'broker' form. Travelers (P) was the only insurer to submit its own specimen policy form (Travelers form) during the course of negotiating the terms of coverage. The Travelers form did not define the term 'occurrence, ' the WilProp form defined occurrence as follows: 'Occurrence' shall mean all losses or damages that are attributable directly or indirectly to one cause or to one series of similar causes. All such losses will be added together and the total amount of such losses will be treated as one occurrence irrespective of the period of time or area over which such losses occur. Ds negotiated separately with Willis concerning its participation in the insurance program and all had bound coverage on various layers as of July 20, 2001. Willis negotiated with Travelers (P) over the terms of its final policy, but Ds have presented no evidence to indicate that any of the other Ps participated in or were aware of the details of those negotiations. As of September 11, 2001, none of the Ps had issued a final policy form, nor had Willis issued the WilProp form as a final policy form, although at least one other participating insurer, Allianz Insurance Company (Allianz), had issued a final policy. On September 14, 2001, three days after the WTC was destroyed, following discussions between Willis and Travelers (P), Travelers (P) issued its final policy form. The district court granted the motions by Ps seeking partial summary judgment on the grounds that each of the insurers had issued a binder that incorporated the terms of the WilProp form and that under the WilProp form's definition of 'occurrence,' there was only one occurrence on September 11, 2001. The district court then reviewed each of the negotiating histories between Willis and Ps and analyzed the language of their binders. In part, because the only policy form before the parties during these negotiations was the WilProp form furnished by Willis, the district court concluded that as a matter of law, each of the three insurers had bound coverage on the basis of the WilProp form, rather than, as Ds contended, the Travelers (P) form. The court held that as a matter of law, under the WilProp form's definition of 'occurrence' the damage caused on September 11th was the result of one occurrence, entitling Ps to no more than a single policy limit on each of the insurers' policies. Ds argue that in construing the binders issued by Ps, the district court erred in rejecting evidence of Ps' agreement to 'follow the [Travelers (P)] form' and that this evidence creates material factual issues in dispute as to whether the WilProp definition of 'occurrence' applies to these insurers. Simply put Ds claim that Ps agreed to 'follow the [Travelers (D)] form' and, therefore, are bound by the terms of the policy that Travelers issued on September 14, 2001, three days after the World Trade Center was destroyed. Ds submitted a substantial amount of custom and usage evidence from both expert and fact witnesses concerning the practice of 'following the form.'

Issues

Rule of Law

Holding and Decision

Legal Analysis

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