SR Int l Bus Ins Co v World Trade Ctr Props LLC Docket Nos 04 4500 cv L 05 6343cv CON Docket Nos 05 3167 cv L 05 3168 cv CON 05 3169 cv CON 05 3170 cv CON 05 3204 cv CON 05 3325 cv CON 05 3940 cv CON and 05 3942 cv CON UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT 467 F 3d 107 2006 U S App LEXIS 25879 71 Fed R Evid Serv Callaghan 613 March 7 2006 Argued October 18 2006 Decided Motion granted by in part Motion denied by in part SR Int l Bus Ins Co v World Trade Ctr Props LLC 2006 U S Dist LEXIS 79326 S D N Y Oct 31 2006 CASE SUMMARY PROCEDURAL POSTURE Appellant insureds and appellant insurers sought review of adverse judgements that the United States District Court for the Southern District of New York entered following a two phase jury trial concerning whether coordinated terrorist attacks whereby two jetliners separately crashed into the twin towers of the World Trade Center constituted one or two occurrences under the terms of more than 30 separate insurance contracts OVERVIEW At the time of the attacks one insurer had issued a final policy and the other insurers had issued binders which did not define occurrence During the first phase of trial the jury determined that appellee insurance companies bound to a policy form that was prepared by the insureds insurance broker Under that form s definition of occurrence the terrorist attacks constituted one occurrence At the second phase of trial the jury determined that appellant insurers which did not bind to the insureds broker s form bound coverage to contracts that contemplated a two occurrence treatment of the terrorist attacks With respect to the insureds appeal from the phase one judgment the court held that any error in excluding custom and usage evidence was harmless and that the insurers witnesses were properly permitted to testify as to which form they thought they had bound With respect to the insurers appeal from the phase two judgment the court held that the insureds expert witness on property insurance was qualified based on experience and that the expert s testimony was sufficient to establish an industry custom of defining occurrence in terms of a physical cause of loss OUTCOME The court affirmed the district court s judgments JUDGES Before WALKER CABRANES and POOLER Circuit Judges OPINION BY JOHN M WALKER JR OPINION 113 JOHN M WALKER JR Circuit Judge These are appeals from judgments following two separate phases of a jury trial to adjudicate whether the coordinated terrorist attacks of September 11 2001 whereby two jetliners separately crashed into the twin towers of the World Trade 5 Center WTC destroying both buildings constituted one or two occurrences under the terms of multiple insurance contracts The parties are entities with varying property interests in the WTC the Silverstein Parties 1 and the insurance companies they retained to provide approximately 3 5 billion in multi layered insurance on a per occurrence basis At issue in the overall litigation is whether the Silverstein Parties can recover in the aggregate up to 3 5 billion for one occurrence or up to 7 billion for two occurrences under the terms of more than thirty separate insurance contracts that together provide the total coverage The parties do not dispute that the destruction of the WTC resulted in a loss that greatly exceeds 3 5 billion Footnotes 1 The insureds include the Port Authority of New York and New Jersey which owns the WTC property in fee simple and Silverstein Properties Inc and several related entities In 2001 Silverstein Properties was the successful bidder on a 99 year lease for the property from the Port Authority Because Silverstein Properties is the party that actually obtained the insurance coverage at issue in this case and was the primary insured for ease of reference we refer to all insureds as the Silverstein Parties End Footnotes 6 The resolution of the broad question presented in these appeals whether the coordinated attacks constituted one or two occurrences is complicated by the fact that as of September 11 2001 the Silverstein Parties were still in the midst of negotiating final property insurance coverage for the WTC Silverstein Properties had only recently entered into a long term lease for the WTC and with one exception none of the many insurers that it had retained to provide property insurance coverage had issued a final insurance policy Instead these insurers had issued HN1 temporary binders or slips which provide interim insurance coverage until a final policy is either issued or refused Springer v Allstate Life Ins Co 94 N Y 2d 645 649 731 N E 2d 1106 1108 710 N Y S 2d 298 2000 These fully enforceable interim insurance contracts or binders are a product of necessity They serve as a quick and informal device to record the giving of protection pending the execution and delivery of a more conventionally detailed policy of insurance Employers Commercial Union Ins Co v Firemen s Fund Ins Co 45 N Y 2d 608 613 384 N E 2d 668 670 412 N Y S 2d 121 1978 see also 7 Springer 94 N Y 2d at 650 noting that a binder and a final policy are two distinct agreements Because in this case the binders left the term occurrence undefined the resolution of the broad question 114 presented in these appeals required an individualized inquiry to determine what each pair of parties the insured Silverstein Parties and each insurer intended for the word occurrence to mean in each binder In a previous opinion in this matter we explained our understanding of the nature of this individualized inquiry In deciding which terms are to be implied in a binder reliance may be placed on the extrinsic evidence of the parties pre binder negotiations In particular we believe that any policy form that was exchanged in the process of negotiating the binder together with any express modifications to that form is likely the most reliable manifestation of the terms by which the parties intended to be bound while the binder was in effect In the absence of such a policy form underlying the negotiations or sufficient extrinsic evidence of the negotiations to determine the parties intentions the terms to be implied would likely be the 8 customary terms of the insurer s own form HN2 World Trade Ctr Props LLC v Hartford Fire Ins Co 345 F 3d 154 170 2d Cir 2003 see also id at 169 To determine the contents of a binder New York courts generally look to 1 the specific terms contained in the binder or incorporated by reference and 2 to the extent necessary as
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