SR International Business Insurance v. World Trade Center Properties LLC
2002 U.S. Dist. LEXIS 17900, 2002 WL 31118331, 222 F. Supp. 2d 385 (2002)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
An insurance binder is a present, temporary contract of insurance whose terms are those to which the parties were bound at the time of its issuance, not the terms to which they might have ultimately agreed in a final policy. Where a binder is not a fully integrated contract, courts will look to extrinsic evidence, such as prior negotiations and documents exchanged, to determine its binding terms.
Facts:
- The Silverstein Parties, through their broker Willis of New York, Inc. ('Willis'), sought property insurance for the World Trade Center complex after acquiring leases for the property.
- Willis provided various potential insurers, including Hartford Fire Insurance Company, Royal Indemnity Company, and St. Paul Fire and Marine Insurance Company, with a draft policy form known as the 'WilProp form' as a basis for coverage.
- The WilProp form contained a specific definition of 'occurrence' which stated: 'all losses or damages that are attributable directly or indirectly to one cause or to one series of similar causes.'
- Hartford's quotes and binders repeatedly stated that coverage was based on the 'Manuscript Forms Submitted With Attached Amendments,' referring to the WilProp form.
- Royal's authorization for coverage explicitly referenced the 'Willis manuscript policy form as submitted' and its underwriter added handwritten notes to the binder making it subject to the terms of that authorization.
- St. Paul's broker, Stewart Smith, sent its underwriter the WilProp form, and the underwriter confirmed coverage by providing a policy number without issuing a formal binder.
- Before any final, formal insurance policies were issued by these insurers, two hijacked airplanes struck the World Trade Center towers on September 11, 2001, causing their total destruction.
Procedural Posture:
- The Silverstein Parties secured property insurance coverage for the World Trade Center through binders issued by over twenty individual insurance companies.
- Following the destruction of the World Trade Center on September 11, 2001, a dispute arose as to whether the attacks constituted one 'occurrence' (limiting liability to one policy payment) or two (requiring two policy payments).
- Hartford Fire Insurance Company, Royal Indemnity Company, and St. Paul Fire and Marine Insurance Company each filed a motion for partial summary judgment in the United States District Court for the Southern District of New York.
- In their motions, the insurers asked the court to rule as a matter of law that their liability was limited to a single payment because their binders incorporated the WilProp form's definition of 'occurrence'.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Do insurance binders issued by Hartford, Royal, and St. Paul incorporate the WilProp form's definition of 'occurrence,' thereby limiting their liability to a single occurrence for the September 11th terrorist attacks?
Opinions:
Majority - District Judge Martin
Yes, the insurance binders incorporated the WilProp form's definition of 'occurrence,' limiting the insurers' liability to a single payment. Under New York law, an insurance binder is a present contract of insurance, not a preliminary agreement to negotiate future terms. The controlling question is what terms the parties were bound to on September 11, 2001, not what terms might have been included in a final policy. The court found that for each insurer, the objective extrinsic evidence demonstrated that the WilProp form was the basis of the bargain at the time coverage was bound. Hartford repeatedly conditioned its binder on the 'Manuscript Form Submitted.' Royal explicitly incorporated its authorization, which was based on the WilProp form, into its binder. For St. Paul, the WilProp form was the only one before the parties when coverage was confirmed, and the principle of mutuality dictates that both parties are bound to its terms. Finally, the court concluded that the WilProp definition of 'occurrence' unambiguously treats the coordinated terrorist attacks as a 'one series of similar causes,' constituting a single occurrence.
Analysis:
This decision solidifies the legal status of insurance binders under New York law as immediate, binding contracts rather than unenforceable 'agreements to agree.' It highlights that courts will enforce the terms ascertainable at the moment of binding by examining the totality of communications and documents exchanged, such as draft forms and authorizations. The ruling serves as a crucial precedent for complex, multi-layered insurance placements, underscoring that an insurer's specific written conditions will likely override arguments based on general industry custom or the terms of a lead insurer's policy that was not yet finalized or agreed to by all parties.
