Though it wasn’t feeling like Spring, and a Nor’Easter hit New England so hard it left many unable to travel, AIRROC’s Spring Membership meeting drew more than 100 attendees over two days. The familiar format of a day for business and education meetings made it a productive combination for our members and supporters. The Education Day featured timely and interesting topics: PwC Global Insurance Runoff Survey, September 11th Coverage Retrospective, Cumis Counsel, E-Cigarettes, and Ethics for In-house Counsel.
September 11th – A Coverage Retrospective
Day Pitney’s Michael Mullins and Jonathan Zelig reprised a session from the Hartford Regional Education Day last summer. The presentation focused on a review of contractual controversies, single or multiple occurrence questions, and measuring business interruption; the presenters also highlighted a few lessons learned for insurers.
Larry Silverstein, a property developer and investor, sealed a 99-year lease for the World Trade Center complex on July 24, 2001 for $3.2B, just over a month before the attack. On September 11, 2001, two hijacked airplanes hit the twin towers, sixteen minutes apart.
The $3 billion question: Seeking two policy limit payments, Silverstein claimed each crash was a separate attack and a separate occurrence. Insurers argued that the plot to hijack and attack on that day represent a single occurrence. The answer: It depends on the definition of occurrence.
A lifelong New Yorker, the Hon. John S. Martin Jr., presided over multiple September 11th policy language cases. Three companies, The Hartford, St. Paul, and Royal, proved they had bound coverage under the WillProp Form that defined occurrence as attributed “to one cause or to one series of similar causes.” Those “cause”-based reinsurers won their single occurrence argument. On the other hand, the Allianz policy language defined occurrence as a “loss or series of losses, disasters, or casualties arising out of one event.” Allianz lost its case.
Lesson number one: In insurance policy language, “cause” is a less-restricted term, while “event” represents a particular time, place, or way. To Allianz, the attack was the event that led to a series of losses. The judge declared that each hijack could also represent an “event” and sent the case to a jury. “Event” and “series” language is often susceptible to counter-interpretation. Not surprisingly, the Lower Manhattan jury sided with the insured and authorized a double policy limit payment. Lesson number two: Avoid high-profile and local jury cases.
For the full article, refer to page 20 in the Spring 2018 issue. https://www.airroc.org/assets/docs/matters/AIRROC_Matters_Spring_2018_Vol_14_No_1.pdf