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Semicolon Brings Victory to Insurer at World Trade Center

February 29, 2008

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The Port Authority of NY and NJ owns the land at Ground Zero. Some of that land was under lease to Larry Silverstein when the planes struck on September 11.
The Port Authority had a policy at that time with Lloyd's. Exclusion "f" in the Lloyd's policy provided that the policy "does not cover" loss or damage to any property in respect of which any third party "has in force at the time of the loss, pursuant to a lease or other written agreement, valid and collectible insurance in favor of the insured or has otherwise indemnified the Insured against such loss or damage; except that if any person, firm or corporation is required pursuant to a lease or other written agreement to insure any property which would otherwise be covered by this Policy, and for whatever reason such property is not fully insured, then such property will be insured property under this Policy."
Fact: Larry Silverstein had procured insurance in favor of The Port Authority but it was insufficient to cover the loss. Fact: Silverstein had agreed in a written lease to indemnify the Port Authority.
Based upon the existence of the indemnity agreement, Lloyd's moved for a declaration that Exclusion "f" was triggered and that the loss or damage to the property leased to Silverstein was not covered under the Lloyd's policy.
The Port Authority disagreed and pointed to the exception within Exclusion "f" and said that because the Silverstein property was "not fully insured," the Port Authority property was "insured property under this Policy."
The court ruled in favor of Lloyd's and held that the exclusion was triggered because Silverstein had agreed to indemnify The Port Authority. The court rejected The Port Authority's argument that because the exception was set off by a semicolon, it must be read to modify both the preceding indemnity clause as well as the preceding insurance procurement clause. The court ruled that "as a matter of law, Exclusion f as set forth in the Port Authority Policy removed the Silverstein property from coverage under the Port Authority Insurance as the Port Authority was indemnified with respect to the Silverstein property at the time of the loss..."
Certain Underwriters at Lloyd's v. The Port Authority of New York and New Jersey. SDNY 05 Civ 5239. Decided 2/22/08.


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