SR International Business Insurance Co. v. World Trade Center Properties, LLC

Rule of Law:

Under New York law, when an interim insurance binder is silent or ambiguous on a key term, the parties' intent is determined by examining extrinsic evidence of their pre-binder negotiations. A jury may find that different insurers involved in the same overall placement are bound by different terms, leading to different coverage outcomes for the same loss.

Facts:

• In the spring of 2001, Silverstein Properties, Inc. acquired a 99-year lease for the World Trade Center (WTC) complex.
• A condition of the lease required Silverstein Properties to obtain approximately $3.5 billion in 'per occurrence' property insurance.
• Silverstein's broker, Willis of New York, circulated a pro-insured policy form, the 'WilProp form,' to potential insurers as a starting point for negotiations.
• The WilProp form contained a broad definition of 'occurrence,' which treated all losses from a 'series of similar causes' as a single event.
• During the summer of 2001, numerous insurers agreed to provide interim coverage through temporary agreements known as binders or slips, but they did not all agree to the same terms.
• Some insurers' binders were understood to incorporate the WilProp form, while others were based on the insurer's own standard forms, which used different or undefined language for 'occurrence.'
• As of September 11, 2001, only one of the more than two dozen insurers had issued a final, formal policy; all others were operating under these varied interim binders.
• On September 11, 2001, terrorists hijacked two separate airplanes and crashed them into the North and South towers of the WTC, respectively, causing the destruction of both buildings.

Procedural Posture:

• SR International Business Insurance Co. sued the Silverstein Parties in the U.S. District Court for the Southern District of New York, seeking a judicial declaration that the WTC's destruction was one insurance loss.
• The Silverstein Parties filed counterclaims against their other insurers, seeking a declaration that the attacks constituted two occurrences.
• On motions for summary judgment, the district court ruled that certain insurers' binders were governed by the WilProp form and its one-occurrence definition.
• In a prior appeal (World Trade Ctr. Props., 345 F.3d 154), the U.S. Court of Appeals for the Second Circuit affirmed the summary judgments, holding that the WilProp form meant one occurrence and that for other binders with an undefined term, the meaning was ambiguous and required a trial to determine the parties' intent.
• On remand, the district court held a two-phase jury trial: Phase I to determine which insurers were bound to the WilProp form, and Phase II to determine the number of occurrences for those who were not.
• The Phase I jury found that most participating insurers were bound by the WilProp form (one occurrence). The Phase II jury found that the remaining insurers were bound by terms that treated the attacks as two occurrences.
• Final judgments were entered based on the verdicts. The Silverstein Parties appealed the adverse Phase I judgments, and the losing insurers appealed the adverse Phase II judgments to the U.S. Court of Appeals for the Second Circuit.