September 11 Property Coverage: One
or Two "Occurrences"?

On September 26, 2003 the United States Court of Appeals issued its judgment in World Trade Center Properties v. Hartford Fire Insurance Company et al.

The World Trade Center was owned by the Port Authority of New York but leased for 99 years to Silverstein Properties.  Silverstein had obtained primary and excess insurance coverage for the complex from approximately two dozen different insurers in the total amount of $3.5 billion "per occurrence".  The broad question was whether the events of September 11, 2001 constituted one or two "occurrences", i.e. whether Silverstein could recover once, up to $3.5 billion or twice, up to $7 billion under the policies.

As of September 11, 2001 none of the property insurers had actually issued a final policy form.  Rather, all had issued "binders", none of which contained a specific definition of "occurrence".

The Court noted that a binder "while an enforceable contract in its own right, is necessarily incomplete" in certain respects and therefore "terms must often be implied" to determine the extent of coverage under the binder.  In that regard, reliance may be placed on the pre-binder negotiations between the parties. And in this case, there was no genuine dispute that the binders issued by three of the four insurers were based on negotiations involving the brokers' form of policy which contained the following definition:

"Occurrence "shall mean all losses or damages that are attributable directly or indirectly to one cause or to one series of similar causes.  All such losses will be added together and the total amount of such losses will be treated as one occurrence irrespective of the period of time or area over which such losses occur".

The fourth insurer involved in the appeal, Travelers Indemnity, had not incorporated the brokers' wording but rather had issued its own wording for preliminary negotiation.  That wording did not include a definition of "occurrence".  Accordingly, Silverstein sought summary judgment on the basis that "occurrence" was a well-known, unambiguous term and that there were two such 
"occurrences" on September 11th insofar as the Travelers' policy was concerned.

The Court of Appeals dismissed this argument as well.  It ruled that the term "occurrence" did not have any specialized or singular meaning in the context of property insurance and that it had to be interpreted based on the facts of each case.  It was for a jury to decide whether the loss in this case was the result of a "single, continuous event or incident" or whether or not it was the result of two separate incidents.  This was an "open question as to which reasonable finders of fact could reach different conclusions".  Hence summary judgment was denied to the insureds.

Readers wishing to obtain a copy of the decision or who have any questions regarding coverage under "binders" or the definition of "occurrence" in a property policy, are invited to contact Nigel Kent at 604-643-3135 or npk@cwilson.com.