Sr International Business Insurance Co, Ltd. v. World Trade Center Properties, Llc.

467 F.3d 107 (2nd Cir. 2006)

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Nature of the Case

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Facts

After the attacks on 9/11 on the World Trade Center Ds attempted to recover on their insurance policies. Ds sought to recover for two occurrences, and SR International et al. (Ps) claimed that there was only one occurrence. The dispute quickly settled on the definition of the word “occurrence” in policies issued as well as temporary binders. There were two policy forms that could supply the missing definition of 'occurrence' in each insurance binder and, hence, determine the amount of recovery to which Ds are entitled: (1) the single occurrence form or (2) a multiple occurrence form. A trial was held to determine which form the insurers were bound to in the first Phase and in the second Phase to determine the number of occurrences for each insurer who was not bound to the single occurrence form. This is a consolidated appeal filed by both the Silverstein Parties, who lost at Phase I, and the insurers, who lost at Phase II, in which they challenge the Phase I and II jury verdicts. During the trial, it was clear that the first form, the WilProp form was designed to be pro-insured; it contained a broad definition of 'occurrence,' which treated all losses attributable to a 'series of similar causes' as a single 'occurrence.' The WilProp form served to limit the number of deductibles that the insureds would have to pay in the event of a loss. Property insurance policies are written so that both deductibles and policy limits are on a 'per occurrence' basis, . . . it is normally in an insured's interest to be able to lump together related events that would otherwise be deemed separate occurrences into a single occurrence in order to avoid absorbing multiple deductibles. Because the terrorist attacks of 9/11 resulted in a loss that greatly exceeded the total one-occurrence limit of $3.54 billion, the pro-insured WilProp form had the effect of favoring the insurers in that it treats the events of September 11 as a single 'occurrence' and subjects any recovery under its terms to the one-occurrence limit. Chief Judge Mukasey structured a two-phase jury trial to adjudicate the two principal factual disputes that remained unresolved: (1) in each case where an insurer claimed to have bound to the 'single-occurrence' WilProp form, whether the parties actually bound to that form (Phase I); and (2) in each of the cases where the WilProp form was found or conceded not to govern, whether the parties intended to issue coverage based on a definition of occurrence that contemplated a one- or two-occurrence treatment of the events of September 11 (Phase II). At the end of Phase I, the jury found that nine of the twelve participating insurers and all twenty of the Lloyd's syndicates bound to the WilProp form. The remaining three insurers, who were found not to have bound to the WilProp form, had their claims adjudicated in Phase II along with the six insurers who conceded that their coverage was not governed by the WilProp form. The Phase II jury determined that all nine of these insurers issued binders or, in the case of Allianz, a final policy that contemplated a two-occurrence treatment of the events of September 11. The district court rejected various motions and entered final judgments in favor of the nine successful insurers and the twenty Lloyd's syndicates following Phase I and the Silverstein Parties following Phase II. These appeals followed. Ds argue that the district court abused its discretion when it permitted several Ps to testify as to which form they thought they had bound to during the course of the parties' negotiations. They contend that this testimony should have been excluded as impermissible evidence of Ps' uncommunicated subjective intent.