Sr Intern. Business Ins. v. World Trade Center

• Decision Date: 18 October 2006
• Docket Number: Docket No. 05-3940-cv(CON).,Docket No. 05-3325-cv(CON).,Docket No. 05-3167-cv(L).,Docket No. 05-3170-cv(CON).,Docket No. 05-3169-cv(CON).,Docket No. 05-3168-cv(CON).,Docket No. 05-3942-cv(CON).,Docket No. 05-3204-cv(CON).,Docket No. 04-4500-cv(L).,Docket No. 05-6343-cv(CON).
• Parties: SR INTERNATIONAL BUSINESS INSURANCE CO., LTD., Plaintiff-Counter-Defendant-Appellee, Copenhagen Reinsurance Co. Ltd., Employers Insurance Company of Wausau, Federal Insurance Co., Great Lakes Reinsurance PLC, Houston Casualty Co., Lexington Insurance Company, Certain Underwriters at Lloyd's, London Insurers, QBE International Insurance Limited, and Württembergische Versicherung AG, Counter-Defendant-Appellees, v. WORLD TRADE CENTER PROPERTIES, LLC, Silverstein Properties, Inc., Silverstein WTC Management Co., LLC, 1 World Trade Center LLC, 2 World Trade Center LLC, 4 World Trade Center LLC, 5 World Trade Center LLC, The Port Authority NY/ NJ, Westfield WTC, LLC, Westfield Corporation, Inc., and Westfield America Inc., Defendants-Counter-Claimants-Appellants, UBS Warburg Real Estate Investments, Inc., Wells Fargo Bank Minnesota, N.A., As Trustee for the registered holders of GMAC Commercial Mortgage Securities, Inc., Mortgage-Backed Pass-Through Certificates, Series 2001—WTC, and GMAC Commercial Mortgage Corporation, Defendants-Counter-Claimants, Gulf Insurance Company, Hartford Fire Insurance Company, St. Paul Fire and Marine Insurance Company, Swiss Reinsurance Co. UK Ltd., Tokio Marine and Fire Insurance Co., Allianz Insurance Co., Royal Indemnity Co., TIG Insurance Co., Zurich American Insurance Co., Industrial Risk Insurers, The Travelers Indemnity Company, and Twin City Fire Insurance Co., Counter-Defendants. SR International Business Insurance Co., Ltd., Plaintiff-Counter-Defendant, Allianz Insurance Co., Gulf Insurance Company, Industrial Risk Insurers, Royal Indemnity Co., TIG Insurance Co., The Travelers Indemnity Company, Twin City Fire Insurance Co., and Zurich American Insurance Co., Counter-Defendants-Appellants, v. World Trade Center Properties, LLC, Silverstein Properties, Inc., Silverstein WTC Management Co., LLC, 1 World Trade Center LLC, 2 World Trade Center LLC, 4 World Trade Center LLC, 5 World Trade Center LLC, The Port Authority NY/NJ, Westfield WTC LLC, Westfield Corporation, Inc., and Westfield America, Inc., Defendants-Counter-Claimants-Appellees, UBS Warburg Real Estate Investments, Inc., Wells Fargo Bank Minnesota, N.A., As Trustee for the registered holders of GMAC Commercial Mortgage Securities, Inc., Mortgage-Backed Pass-Through Certificates, Series 2001—WTC, and GMAC Commercial Mortgage Corporation, Defendants-Counter-Claimants, Copenhagen Reinsurance Co., Ltd., Employers Insurance Company of Wausau, Federal Insurance Co., Great Lakes Reinsurance PLC, Hartford Fire Insurance Company, Houston Casualty Co., Lexington Insurance Company, Certain Underwriters at Lloyd's, London, QBE International Insurance Limited, Swiss Reinsurance Co. UK Ltd., Tokio Marine and Fire Insurance Co., and Württembergische Versicherung AG, Counter-Defendants.
• Court: U.S. Court of Appeals — Second Circuit

467 F.3d 107

SR INTERNATIONAL BUSINESS INSURANCE CO., LTD., Plaintiff-Counter-Defendant-Appellee, Copenhagen Reinsurance Co. Ltd., Employers Insurance Company of Wausau, Federal Insurance Co., Great Lakes Reinsurance PLC, Houston Casualty Co., Lexington Insurance Company, Certain Underwriters at Lloyd's, London Insurers, QBE International Insurance Limited, and Württembergische Versicherung AG, Counter-Defendant-Appellees, v. WORLD TRADE CENTER PROPERTIES, LLC, Silverstein Properties, Inc., Silverstein WTC Management Co., LLC, 1 World Trade Center LLC, 2 World Trade Center LLC, 4 World Trade Center LLC, 5 World Trade Center LLC, The Port Authority NY/ NJ, Westfield WTC, LLC, Westfield Corporation, Inc., and Westfield America Inc., Defendants-Counter-Claimants-Appellants, UBS Warburg Real Estate Investments, Inc., Wells Fargo Bank Minnesota, N.A., As Trustee for the registered holders of GMAC Commercial Mortgage Securities, Inc., Mortgage-Backed Pass-Through Certificates, Series 2001—WTC, and GMAC Commercial Mortgage Corporation, Defendants-Counter-Claimants, Gulf Insurance Company, Hartford Fire Insurance Company, St. Paul Fire and Marine Insurance Company, Swiss Reinsurance Co. UK Ltd., Tokio Marine and Fire Insurance Co., Allianz Insurance Co., Royal Indemnity Co., TIG Insurance Co., Zurich American Insurance Co., Industrial Risk Insurers, The Travelers Indemnity Company, and Twin City Fire Insurance Co., Counter-Defendants.

SR International Business Insurance Co., Ltd., Plaintiff-Counter-Defendant, Allianz Insurance Co., Gulf Insurance Company, Industrial Risk Insurers, Royal Indemnity Co., TIG Insurance Co., The Travelers Indemnity Company, Twin City Fire Insurance Co., and Zurich American Insurance Co., Counter-Defendants-Appellants, v. World Trade Center Properties, LLC, Silverstein Properties, Inc., Silverstein WTC Management Co., LLC, 1 World Trade Center LLC, 2 World Trade Center LLC, 4 World Trade Center LLC, 5 World Trade Center LLC, The Port Authority NY/NJ, Westfield WTC LLC, Westfield Corporation, Inc., and Westfield America, Inc., Defendants-Counter-Claimants-Appellees, UBS Warburg Real Estate Investments, Inc., Wells Fargo Bank Minnesota, N.A., As Trustee for the registered holders of GMAC Commercial Mortgage Securities, Inc., Mortgage-Backed Pass-Through Certificates, Series 2001—WTC, and GMAC Commercial Mortgage Corporation, Defendants-Counter-Claimants,

Copenhagen Reinsurance Co., Ltd., Employers Insurance Company of Wausau, Federal Insurance Co., Great Lakes Reinsurance PLC, Hartford Fire Insurance Company, Houston Casualty Co., Lexington Insurance Company, Certain Underwriters at Lloyd's, London, QBE International Insurance Limited, Swiss Reinsurance

Co. UK Ltd., Tokio Marine and Fire Insurance Co., and Württembergische Versicherung AG, Counter-Defendants.

Docket No. 04-4500-cv(L).

Docket No. 05-6343-cv(CON).

Docket No. 05-3167-cv(L).

Docket No. 05-3168-cv(CON).

Docket No. 05-3169-cv(CON).

Docket No. 05-3170-cv(CON).

Docket No. 05-3204-cv(CON).

Docket No. 05-3325-cv(CON).

Docket No. 05-3940-cv(CON).

Docket No. 05-3942-cv(CON).

United States Court of Appeals, Second Circuit.

Argued: March 7, 2006.

Decided: October 18, 2006.

Herbert M. Wachtell and Eric M. Roth, Wachtell, Lipton, Rosen & Katz (Bernard

W. Nussbaum, Marc Wolinsky, Ben M. Germana, and Gordon M. Mead, Jr., Wachtell, Lipton, Rosen & Katz; John H. Gross, Proskauer Rose LLP, on the brief), New York, NY, for World Trade Center Properties LLC, Silverstein Properties, Inc., Silverstein WTC Management Co. LLC, 1 World Trade Center LLC, 2 World Trade Center LLC, 4 World Trade Center LLC, and 5 World Trade Center LLC.

Skadden, Arps, Slate, Meagher & Flom LLP (Timothy G. Reynolds, New York, NY) and The Port Authority of New York and New Jersey (Megan Lee and Timothy G. Stickelman, New York, NY), for The Port Authority of New York and New Jersey.

Latham & Watkins LLP (Blair Connelly, New York, NY; Peter K. Rosen, Los Angeles, CA; Maureen E. Mahoney, Washington, D.C.; Kristine L. Wilkes, Laura A. Godfrey, Robert S. Huie, Robert G. Knaier, and Colleen C. Smith, San Diego, CA, on the brief), for Westfield WTC LLC, Westfield Corporation, Inc., and Westfield America, Inc.

Barry R. Ostrager (Mary Kay Vyskocil, on the brief), Simpson Thacher & Bartlett LLP, New York, NY, for SR International Business Insurance Co., Ltd.

Mendes & Mount, LLP (Leo W. Fraser, III, and Christine M. McNicholas, New York, NY, on the brief), for Copenhagen Reinsurance Co. Ltd.

Christopher S. Finazzo (Robert F. Cossolini and Michael Mernin, on the brief), Budd Larner PC, Short Hills, NJ, for Employers Insurance Company of Wausau.

Thomas McKay, III (Stephen A. Cozen, Jacob C. Cohn, and Michael A. Hamilton, on the brief), Cozen O'Connor, P.C., Philadelphia, PA, for Federal Insurance Co.

Stuart Cotton, Mound, Cotton, Wollan & Greengrass, New York, NY, for Lexington Insurance Company.

David Boies, Boies, Schiller & Flexner LLP (Edward Normand, Boies, Schiller & Flexner LLP, Armonk, NY; Kenneth W. Erickson, Robert A. Skinner, and Bryan R. Diederich, Ropes & Gray LLP, Boston, MA, on the brief), Armonk, NY, for Certain Underwriters at Lloyd's, London.

Baker & McKenzie, LLP (Grant Hanessian, New York, NY, on the brief), for QBE International Insurance Ltd.

Louis R. Cohen, Wilmer Cutler Pickering Hale & Dorr LLP (Seth P. Waxman, Edward C. DuMont, and Rachel Z. Stutz, Wilmer Cutler Pickering Hale & Dorr LLP, Washington, D.C.; Catherine M. Colinvaux, Zelle, Hofmann, Voelbel, Mason & Gette LLP, Waltham, MA; John B. Massopust, Richard L. Voelbel, Patricia St. Peter, Adam P. Gislason, and Matthew J. Gollinger, Zelle, Hofmann, Voelbel, Mason & Gette LLP, Minneapolis, MN, on the brief), Washington, D.C., for Allianz Insurance Company.

Harvey Kurzweil, Dewey Ballantine LLP (John E. Schreiber, Michael Thelen, and Kathleen M. Thompson, Dewey Ballantine LLP, New York, NY; Robert J. Morrow, Hunton & Williams LLP, New York NY, on the brief), New York, NY, for Gulf Insurance Company and Travelers Indemnity Company.

Philip A. Sechler (John G. Kester and Carolyn H. Williams, Zoe S. Poulson, Janet C. Fisher, and Christina P. Giffin, on the brief), Williams & Connolly LLP, Washington, D.C., for Industrial Risk Insurers.

Michael H. Barr (Sandra D. Hauser, Edward J. Reich, and Michael R. Galligan, on the brief), Sonnenschein Nath & Rosenthal LLP, New York, NY, for Royal Indemnity Company.

Mound Cotton Wollan & Greengrass (Costantino P. Suriano, on the brief), New York, NY, for TIG Insurance Company.

Hogan & Hartson L.L.P. (William J. Bowman and Joshua D. Weinberg, on the brief), Washington, D.C., for Twin City Fire Insurance Co.

O'Melveny & Myers LLP and Wiley Rein & Fielding LLP (Paul R. Koepff, O'Melveny & Myers LLP, New York, NY; Ira H. Raphaelson, O'Melveny & Myers LLP, Washington, D.C.; M. Evan Corcoran, Wiley Rein & Fielding LLP, Washington, D.C., on the brief), for Zurich American Insurance Co.

Before WALKER, CABRANES and POOLER, Circuit Judges.

JOHN M. WALKER, JR., Circuit Judge.

These are appeals from judgments following two separate phases of a jury trial to adjudicate whether the coordinated terrorist attacks of September 11, 2001— whereby two jetliners separately crashed into the twin towers of the World Trade Center ("WTC"), destroying both buildings—constituted one or two "occurrences" under the terms of multiple insurance contracts. The parties are entities with varying property interests in the WTC (the "Silverstein Parties")¹ and the insurance companies they retained to provide approximately $3.5 billion in multi-layered insurance on a "per occurrence" basis. At issue in the overall litigation is whether the Silverstein Parties can recover in the aggregate up to $3.5 billion, for one occurrence, or up to $7 billion, for two occurrences, under the terms of more than thirty separate insurance contracts that together provide the total coverage. The parties do not dispute that the destruction of the WTC resulted in a loss that greatly exceeds $3.5 billion.

The resolution of the broad question presented in these appeals—whether the coordinated attacks constituted one or two occurrences—is complicated by the fact that, as of September 11, 2001, the Silverstein Parties were still in the midst of negotiating final property insurance coverage for the WTC. Silverstein Properties had only recently entered into a long-term lease for the WTC and, with one exception, none of the many insurers that it had retained to provide property insurance coverage had issued a final insurance policy. Instead, these insurers had issued temporary binders or slips, which provide interim insurance coverage until a final policy is either issued or refused. Springer v. Allstate Life Ins. Co., 94 N.Y.2d 645, 649, 710 N.Y.S.2d 298, 731 N.E.2d 1106, 1108 (2000). These fully enforceable, interim insurance contracts or binders are a product of necessity: They serve as a "quick and informal device to record the giving of protection pending the execution and delivery of a more conventionally detailed policy of insurance." Employers Commercial Union Ins. Co. v. Firemen's Fund Ins. Co., 45 N.Y.2d 608, 613, 412 N.Y.S.2d 121, 384 N.E.2d 668, 670 (1978); see also Springer, 94 N.Y.2d at 650, 710 N.Y.S.2d 298, 731 N.E.2d 1106 (noting that a binder and a final policy are "two distinct agreements"). Because, in this case, the binders left the term "occurrence" undefined, the resolution of the broad question presented in these appeals required an individualized inquiry to determine what each pair of parties—the insured Silverstein Parties and each insurer—intended for the word "occurrence" to mean in each binder.

In a previous opinion in this matter, we explained our understanding of the nature of this individualized inquiry:

In deciding which terms are to be implied in a binder, reliance may be placed on the extrinsic evidence of the parties' pre-binder negotiations. In particular, we believe that...