WTC Captive Insurance v. Liberty Mutual Fire Insurance

537 F. Supp. 2d 619, 2008 U.S. Dist. LEXIS 24825, 2008 WL 748405
CourtDistrict Court, S.D. New York
DecidedMarch 19, 2008
Docket07 CIV 1209 AKH
StatusPublished
Cited by6 cases

This text of 537 F. Supp. 2d 619 (WTC Captive Insurance v. Liberty Mutual Fire Insurance) is published on Counsel Stack Legal Research, covering District Court, S.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
WTC Captive Insurance v. Liberty Mutual Fire Insurance, 537 F. Supp. 2d 619, 2008 U.S. Dist. LEXIS 24825, 2008 WL 748405 (S.D.N.Y. 2008).

Opinion

ORDER DENYING DEFENDANTS’ MOTION TO RECONSIDER SUBJECT MATTER JURISDICTION

ALVIN K. HELLERSTEIN, District Judge.

This case involves a clash among insurance carriers.

In the aftermath of the terrorist-related aircraft crashes into the World Trade Center on September 11, 2001, the City of New York procured insurance to protect itself and its contractors from loss, liability and expense arising from the removal of debris from the collapsed Twin Towers. Approximately 10,000 lawsuits have been filed against the City and its contractors relating to such work, all consolidated before me pursuant to this court’s exclusive jurisdiction. See Air Transportation Safety and System Stabilization Act, 49 U.S.C. § 40101, (“ATSSSA”), Section 408(b)(3). Under the Act, the City cannot be liable, in the aggregate, for more than its insurance coverage (more precisely, the greater of $350 million or its insurance coverage). Id., section 408(a)(3). The lawsuit brought by the insurance carriers will fix that coverage, and requires me to rule who among them, and in what sequence, should bear the costs of defending the 10,000 lawsuits, and pay for the liabilities or losses that might be incurred. At the threshold, I am required to rule if this court has subject matter jurisdiction over the insurance companies’ lawsuit.

I ruled in favor of this court’s jurisdiction twice before, once in related litigation brought by and against the insurance carriers protecting the owners and lessees of the Twin Towers from loss, liability and expense, see In re Sept. 11th Liab. Ins. Coverage Cases, 333 F.Supp.2d 111, 115-19 (S.D.N.Y.2004), and again in the present case, by Order dated December 14, 2007. I write now, in response to the insurance carriers’ motion for reconsideration, to provide a fuller explanation of this court’s subject matter jurisdiction.

The City’s Insurance Program

In the wake of the September 11 attacks on the World Trade Center, and in connection with the massive job that lay ahead to clear the debris of the attacks, the City sought and obtained insurance protection. Protection in the amount of $77 million was obtained, arranged in several layers.

Liberty Mutual Fire Insurance Company (“Liberty Mutual”), a Massachusetts company with its principal place of business in Boston, retroactively engaged to be the primary carrier. 1 While the complaint alleges that the policy was obtained shortly after September 11, 2001, the precise date is unknown. The policy provided $4 million aggregate coverage to the City and its contractors and consultants for bodily injury occurring in connection with the World Trade Center clean-up effort, and covered the period from September 11, 2001 to December 31, 2002. The policy imposed a duty on Liberty Mutual to defend the insureds up to the indemnity limits of the policy. The policy was subject to a num *622 ber of exclusions, including an exclusion for “bodily injury or property damage arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of ‘pollutants’

The City contracted also for excess coverage in the London market, arranging the next $75 million layer of coverage with various syndicates at Lloyd’s, joined by Assicurazioni Generali S.p.A., and General Security Indemnity Company of Arizona (collectively the “London,” or the “Excess” “Insurers”). Two policies were obtained, the first, contracted for on October 5, 2001, for $50 million of coverage, and the second, contracted for on January 9, 2002, for $25 million of coverage. Like the primary coverage provided by Liberty, the excess coverage provided by the London Insurers covered the City and its contractors for their exposure to liability and loss arising from the clean-up efforts at the World Trade Center covering the period from September 11, 2001 to December 31, 2002. The policies also covered the City against the expense of defending the claims and lawsuits brought against it, with the costs of such defense to be additional to, and not subtracted from, the City’s liability and loss. The London Insurers’ policy also contained various exclusions, including a pollution exclusion barring coverage for bodily injury “arising out of the actual or threatened discharge, dispersal, seepage, migration, release or escape of pollutants anywhere in the world”. The London Insurers’ liability arises upon the exhaustion of the Liberty Mutual policy, and in excess of the insured’s retained limit, which the London Insurers allege to be between $250,000 and $2 million per occurrence. The London Insurers’ duty to defend ends when the policy limits have been exhausted.

Approximately two years later, on December 3, 2004, the City obtained additional protection for itself and its contractors from the Federal Emergency Management Agency (“FEMA”). Funded by a grant from FEMA, a not-for-profit, captive insurance company was formed— WTC Captive Insurance Company (“WTC Captive!’) — to protect the City and its contractors against loss, liability and expense that exceeded the City’s existing insurance protection. The WTC Captive received roughly $1 billion in funds from FEMA and insured the City and its contractors and consultants against claims arising in connection with the World Trade Center clean-up effort. In contrast with the other policies, the WTC Captive policy does not appear to contain a pollution exclusion. Like the other policies, the WTC Captive policy obligated the WTC Captive to undertake the defense of the insured, but the WTC Captive’s duty to defend was not triggered until the underlying insurers’ duties to defend had been exhausted, and was to last until its own policy limits were exhausted. The Liberty Mutual policy and both London Insurers’ policies are listed as underlying policies in the WTC Captive policy.

The Prior Proceedings

Beginning in 2002, and continuing to the present, the City and its contractors were sued by those who worked at the World Trade Center site, to recover damages for the personal injuries they allegedly incurred — mostly, injuries to their respiratory tracts and various cancers. The City and the Contractors made demand upon its insurance carriers to defend it in such suits, but only WTC Captive responded affirmatively, beginning in the Fall of 2004. There are now approximately 10,000 of these suits. They are all pending in this court and are assigned to me. They are consolidated for coordinated pre-trial discovery. See The World Trade Center Disaster Site Litigation, 21 MC 100.

*623 Beginning in October 2002, the City and its contractors provided notice to the London Insurers of the claims pending against them in connection with the World Trade Center clean-up effort. In February 2006, the WTC Captive began providing notice to the London Insurers of their duty to defend the City and its contractors, and seeking reimbursement for the expenses WTC Captive had thus far incurred. 2

The London Insurers claim that the first notice they received of the claims against the City and its contractors was in August 2006, from the WTC Captive.

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Related

In re World Trade Center Disaster Site Litigation
834 F. Supp. 2d 184 (S.D. New York, 2011)
Schwade v. Total Plastics, Inc.
837 F. Supp. 2d 1255 (M.D. Florida, 2011)
Industrial Risk Insurers v. 7 World Trade Co.
765 F. Supp. 2d 587 (S.D. New York, 2011)
In Re September 11 Litigation
765 F. Supp. 2d 587 (S.D. New York, 2011)
Glover v. Nationwide Mutual Fire Insurance
676 F. Supp. 2d 602 (W.D. Michigan, 2009)
WTC Captive Insurance v. Liberty Mutual Fire Insurance
549 F. Supp. 2d 555 (S.D. New York, 2008)

Cite This Page — Counsel Stack

Bluebook (online)
537 F. Supp. 2d 619, 2008 U.S. Dist. LEXIS 24825, 2008 WL 748405, Counsel Stack Legal Research, https://law.counselstack.com/opinion/wtc-captive-insurance-v-liberty-mutual-fire-insurance-nysd-2008.