In re September 11TH Liability Ins. Coverage Cases

• Decision Date: 01 March 2004
• Docket Number: No. 03 CV 332(AKH).,03 CV 332(AKH).
• Parties: In re SEPTEMBER 11TH LIABILITY INSURANCE COVERAGE CASES
• Court: U.S. District Court — Southern District of New York

333 F.Supp.2d 111

In re SEPTEMBER 11TH LIABILITY INSURANCE COVERAGE CASES

No. 03 CV 332(AKH).

United States District Court, S.D. New York.

March 1, 2004.

COPYRIGHT MATERIAL OMITTED

Bruce A. Baird, Richard A. Beckmann, Mitchell F. Dolin, Neil K. Roman, Covington & Burling, Washington, DC, for UBS Warburg Real Estate Investments, Inc.

Christopher T. Bradley, Marshall, Conway & Wright, PC, New York City, for General Star Nat. Ins. Co.

Thomas W. Bruner, Thomas S. Garrett, Leslie A. Platt, Gary P. Seligman, Keith S. Watson, Wiley, Rein & Fielding, L.L.P., Washington, DC Brian James Carey, Kevin T. Coughlin, Todd Harris, Robert K. Kelly, McElroy, Deutsch & Mulvaney, LLP, New York City, for Zurich American Ins. Co.

James W. Carbin, Duane, Morris, L.L.P., Neward, NJ, for Great American Ins. Co.

Nancy Sher Cohen, Heller, Ehrman, White & McAuliffe, Los Angeles, CA, Nancy Sher Cohen, Heller, Ehrman, White & McAuliffe, New York City, Stephen N. Goldberg, Heller, Ehrman, White & McAuliffe, San Francisco, CA, Edward Michael Joyce, Heller, Ehrman, White & McAuliffee, New York City, for GMAC Commercial Mortg. Corp.

William T. Corbett, Jr., Drinker Biddle & Shanley, L.L.P., Florham Park, NJ, for Nat. Union Fire Ins. Co. of Pittsburgh, PA.

Louis G. Corsi, Landman Corsi Ballaine & Ford P.C., New York City, for U.S. Fire Ins. Co.

Stuart Cotton, Mound, Cotton, Wollan & Greengrass, New York City, for Starr Excess Liability Ins. Co.

Ariel Michael Furman, Kaufman, Borgeest and Ryan, LLP, New York City, for Certain Underwriters at Lloyds, London.

Judith F. Goodman, Goodman & Jacobs, L.L.P., New York City, for Federal Ins. Co.

Edward J. Grass, Shaw Pittman LLP, McLean, VA, for St. Paul Fire and Marine Ins. Co.

Keith Harris, Office of Milton H. Pachter, New York City, Randy Paar, Dickstein, Shapiro, Morin & Oshinsky LLP (NY), New York City, for Port Authority Trans-Hudson Corp. Christopher W. Healy, John P. Hooper, Edwards & Angell, L.L.P., New York City, for Lexington Ins. Co.

James Eric Keller, Mayer, Brown, Rowe & Maw LLP, New York City, for Westfield WTC Holding, LLC.

Bernard London, London, Discher, LLP, New York City, for Great American Ins. Co.

Noah Nunberg, L'Abbate, Balkan, Colavita & Contini, LLP, Garden City, NJ, for Ohio Cas. Ins. Co.

Frederick W. Reif, Riker Danzig Scherer Hyland & Perretti LLP, New York City, for Gerling Konzern Allgemeine Versicherungs AG.

William M. Savino, Rivkin, Radler, L.L.P., Uniondale, NY, for Axa Corporate Solutions.

William A. Schreiner, Jr., Shaw, Pittman, L.L.P., McLean, VA, for Athena Assur. Co.

Edward D. Tanenhaus, New York City, for 1 World Trade Center Holdings, LLC.

Mark R. Vespole, Tressler, Soderstrom, Maloney and Priess, Newark, NJ, for Lumberman's Mut. Cas. Co.

OPINION AND ORDER DENYING RULE 12(c) MOTIONS AS TO INSURANCE COVERAGE

HELLERSTEIN, District Judge.

The terrorist-related aircraft crashes of September 11, 2001, causing 2,749 deaths, and many injuries at the World Trade Center, gave rise to numerous lawsuits against the owner and lessees of the World Trade Center properties. The owner and lessees, in turn, have made demands on the insurance companies they allege are obligated to defend them in these lawsuits. I discuss in this opinion whether and to what extent the owners and lessees are entitled to the status and benefits of an "insured" under applicable insurance documents and whether New York law requires the insurer to defend the lawsuits under the coverage.

Background

The Port Authority of New York and New Jersey (Port Authority) owned and operated the properties constituting the World Trade Center until approximately July, 2001. Then, the Port Authority entered into lease agreements with five entities (the Net Lessees) to lease the Twin Towers (One and Two World Trade Center), two office buildings known as Four and Five World Trade Center and the World Trade Center Retail Mall. An entity affiliated with the Net Lessees, World Trade Center Properties LLC (WTCP), obtained binders from Zurich American Insurance Company (Zurich), for a primary Commercial General Liability Policy (CGL Policy) and a Commercial Umbrella Policy (Umbrella Policy) (together, the Policies) for the leased properties. As of September 11, 2001, only Zurich's binders were in place, which listed only WTCP as the "named insured." The actual Policies were issued after September 11th. Other insurance carriers issued policies for amounts of coverage in excess of Zurich's coverage (Excess Carriers).

Following the September 11, 2001 attacks, the legal successors of those who died, and many of those who were injured, brought suit to recover damages for breaches of duties of care owed to the decedents and the injured. See e.g., Broghammer v. United Airlines, et al., 02 Civ. 7174(AKH), Baksh v. American Airlines, Inc. et al., 02 Civ. 7224(AKH), and Friedlander v. United Airlines, et al., 02 Civ. 7171(AKH) (Underlying Cases), consolidated in In Re September 11th Litigation, 21 MC 97(AKH). These Underlying Cases named multiple defendants, including the Port Authority and WTCP.¹ WTCP brought a third-party action against Zurich for declaratory relief regarding Zurich's obligations to itself and to other asserted insureds, including the Port Authority. Zurich filed a fourth-party action and an original complaint against WTCP, the Port Authority, the Net Lessees and the Excess Carriers, among others, raising the same issues. The third- and fourth-party actions were consolidated for pre-trial proceedings in In Re September 11th Liability Insurance Coverage Cases, 03 Civ. 0332(AKH).

The Port Authority and WTCP now bring motions under Rule 12(c) of the Federal Rules of Civil Procedure for judgment on the pleadings with regard to basic issues of their insurance coverage: (1) whether the Port Authority is entitled to the status of an "Additional Insured" and if so, what is the scope of that coverage; and (2) whether New York insurance law requires the Policies, which exclude defense costs, to provide for a defense and, if so, what consequences follow. The moving parties claim that they are in urgent need of the relief they seek because of the substantial costs they have incurred, and continue to incur, in defending the underlying September 11th litigation. The insurance carriers argue that the motions cannot be resolved without making factual determinations of disputed issues, and that much more discovery is needed.

For the reasons discussed in this opinion, I deny both motions. I hold that the Binder, as the applicable document, is ambiguous regarding whether the Port Authority was intended as an Additional Insured, and that it is premature to determine the scope of any such coverage. And I hold that New York Insurance Law and Regulations, as applied to the circumstances before me, do not require me to rewrite Zurich's Binder and Policies to include an obligation to defend WTCP.

Discussion

A. Jurisdiction

The parties in the Underlying Cases assert jurisdiction based on The Air Transportation Safety and System Stabilization Act (the Act). See 49 U.S.C. § 40101, Pub.L. No. 107-42, 115 Stat. 230, 240 (Sept. 22, 2001), as amended by Pub.L. No. 107-71, § 201, 115 Stat. 597, 645 (Nov. 19, 2001). The Act contains five principal titles. Id. Four of the titles grant the airline industry financial and tax assistance. Title IV is entitled "Victim Compensation" and its stated purpose is to provide adequate compensation for those who were killed or injured in the September 11 attacks while protecting the airline industry and other entities from the crushing liability that likely would have resulted from lawsuits. The Act at § 403. To further these goals, the Act limits damages to the amount of liability insurance carried by certain defendants, including air carriers and persons with a property interest in the World Trade Center. Id. at § 408(a)(1). The Act also creates "a Federal cause of action for damages arising out of the hijacking and subsequent crashes ... on September 11, 2001," § 408(b)(1), and provides that the substantive law for such suits is to be the state law where the crash occurred unless preempted by federal law. Id. at § 408(b)(2). The Act bestows "original and exclusive jurisdiction" upon this court "over all actions brought for any claim (including any claim for loss of property, personal injury, or death) resulting from or related to the terrorist-related aircraft crashes of September 11, 2001." § 408(b)(3).

The liability insurance cases present the issue of whether this court has subject matter jurisdiction over third- and fourth-party claims involving the primary insurance policies of defendants in the Underlying Cases. Generally, Congress has the power to extend federal court jurisdiction to cases arising under the Constitution or the laws of the United States. U.S. Const. art. III, § 2; Verlinden B.V. v. Cent. Bank of Nigeria, 461 U.S. 480, 491, 103 S.Ct. 1962, 76 L.Ed.2d 81 (1983); World Trade Ctr. Props. LLC v. Hartford Fire Ins. Co., 345 F.3d 154, 164 (2d Cir.2003). Claims involving solely issues of state law generally fall outside these boundaries. World Trade Ctr. Props. LLC, 345 F.3d at 164 (quoting Verlinden, 461 U.S. at 491, 103 S.Ct. 1962). Nonetheless, a grant of jurisdiction, even over state law claims, may be constitutionally permissible if it "raises questions of substantive federal law." Verlinden, 461 U.S. at 493, 103 S.Ct. 1962.

Although the parties agreed that this court has subject matter jurisdiction, I, nonetheless, raised the issue of jurisdiction and asked for briefs because of my independent duty to determine if subject matter jurisdiction exists. Wynn v. AC Rochester, 273 F.3d 153, 157 (2d Cir.2001) ("Parties cannot confer subject matter jurisdiction where the Constitution and Congress have not."). The parties argue that the third- and fourth-party claims arise under both the laws of the United States and the supplemental jurisdiction of this court...