Four Times Square Associates, LLC v. Cigna Investments, Inc.
| Decision Date | 03 June 2003 |
| Citation | 306 A.D.2d 4,764 N.Y.S.2d 1 |
| Court | New York Supreme Court — Appellate Division |
| Parties | FOUR TIMES SQUARE ASSOCIATES, L.L.C., Appellant, and<BR>DURST 14 INVESTORS, L.L.C., et al., Intervenors-Appellants,<BR>v.<BR>CIGNA INVESTMENTS, INC., et al., Respondents. |
Plaintiff Four Times Square Associates, L.L.C. (Four Times Square) holds a ground lease for the subject property, the Conde Nast Building, which is encumbered by a $430 million nonrecourse mortgage. The mortgage note was placed in a trust whose beneficiaries are the investors who funded the loan and received debt instruments or certificates, which are rated and can be traded. Defendant LaSalle Bank National Association (LaSalle) is the trustee of the mortgage and, pursuant to a trust and servicing agreement, acts through defendants Cigna Investments, Inc. (Cigna), as special servicer, and BNY Asset Solutions L.L.C., as servicer. Four Times Square entered into a cash management agreement with the servicer and special servicer under which a lockbox account was established at the Bank of New York for the deposit of building revenues. In the event of a default under the mortgage, these lockbox funds may be redirected to a cash management account and used, inter alia, to procure appropriate insurance coverage.
Although paragraphs 6 (a) (i) and (viii) of the subject mortgage require Four Times Square to maintain certain insurance coverage generally available from domestic insurance carriers at commercially reasonable premiums at its sole cost and expense, it does not expressly require terrorism insurance coverage. At the time the mortgage originated and the initial insurance policy was issued, acts of terrorism were not excluded from coverage under the "all risk" provisions of the policy. In the wake of the terrorist attacks of September 11, 2001, however, the proposed renewal policy explicitly excluded acts of terrorism from coverage. Subsequently, defendant Cigna, as special servicer, declared an event of default under the mortgage and instructed defendant Bank of New York to transfer the lockbox account funds into the cash management account and to procure separate terrorism insurance coverage. In the interim, Four Times Square purchased a $100 million terrorism insurance policy and obtained a $3.5 million letter of credit, which names Cigna as beneficiary, to secure the estimated premiums for such additional coverage.
Prior to the expiration of the original insurance policy, Four Times Square commenced this action seeking, inter alia, a preliminary injunction preventing defendants from taking any action in holding it in default under the mortgage and from invading the lockbox account. By order dated June 20, 2002, the motion court, inter alia, denied Four Times Square's motion for a preliminary injunction, finding that plaintiff would not suffer irreparable harm and could not establish a likelihood of success on the merits as a...
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