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Sandy Crane Collapse Coverage Dispute Resolved by NY Court of Appeals

February 22, 2017

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New York’s highest court determined that there is no coverage in one of the most high profile coverage disputes to emerge in the wake of Superstorm Sandy.  Following the storm, the nation watched transfixed as a construction crane dangled and then plummeted from the top of a luxury mixed-use highrise, known as One57.  In <a href=""><em>Lend Lease (US) Construction LMB Inc., et al. v. Zurich American Insurance Company, et al.</em></a>, the crane contractor, as the named insured, and the construction manager, as an additional insured, sought coverage under a $700 million builder’s risk policy, which consisted of five separate grants with identical language issued by Zurich and four other carriers.  The New York Court of Appeals ultimately affirmed the result of the 3-2 decision of the First Department of the Appellate Division, although the high court differed from the First Department in material respects.
The First Department’s majority agreed with the insurers that the crane did not qualify as “temporary work” and, therefore, was not covered property under the policies.  The majority and dissent differed sharply on this issue, and focused on whether the crane was “incidental” or “integral” to the project.  The majority and dissent further disagreed as to whether the crane qualified as a “tool,” and was therefore subject to the contractor’s tool exclusion.
The Court of Appeals sided with the dissent and held that the crane was clearly temporary in nature.  However, the Court further ruled there was an issue of fact as to whether the crane ultimately qualified as a “temporary work,” as defined under the policy, because its value may not have been specifically disclosed.  The Court concluded there was an issue of fact as to whether it was sufficient for these purposes to simply include the crane as part of the total value of the project.
Despite this departure from the First Department’s majority decision, the Court ultimately reached the same result.  The high court agreed the crane qualified as a tool or, at a minimum, machinery, both of which fall within the purview of the contractor’s tools exclusion.
As is often the case in coverage, the heart of this dispute involved reconciling real world experience with policy terms.  In essence, the Court of Appeals was tasked with determining whether a piece of heavy equipment mounted onto a building could be properly described as a “temporary” structure or something as simple as a “tool.”  In the end, the Court of Appeals embraced a common sense interpretation of “temporary,” recognizing that the crane existed only for the life of the project.  Likewise, though, the Court took a common sense yet expansive view of what constitutes a tool or machinery.  This decision resolved potential gray areas of interpretation that could have plagued coverage evaluations going forward, and will certainly be useful precedent in numerous cases.
Thanks to Chris Soverow for his contribution to this post.


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