In re September 11 Litigation Consolidated Edison Co. of N.Y., Inc. v. Port Auth. of N.Y. & N.J. (S.D.N.Y. July 27, 2009)
A federal judge has ordered the Port Authority of New York and New Jersey to pay $17.6 million to Consolidated Edison and its insurers for property damage sustained during the September 11th attacks on the World Trade Center. In 1968, Con Ed and the Port Authority entered into a lease and electrical supply agreement wherein the Port Authority granted Con Ed the right to occupy a parcel of land on which the Port Authority built an electrical power substation for Con Ed to operate. Ultimately, 7 World Trade Center was built above the substation. On September 11, 2001, 7 World Trade Center collapsed after a terrorist attack on the building. In June 2004, Con Ed erected a new substation and restored permanent electrical services to lower Manhattan.
The 1968 lease contained a provision requiring the Port Authority to reimburse Con Ed “for any expense incurred by [Con Ed] in maintaining, repairing, replacing or rebuilding the Substation Building or … Substation Equipment where such expenses are incurred by the acts or omissions of the Port Authority….” Con Ed and its subrogated insurers filed an action against the Port Authority, alleging negligence and breach of the lease agreement. Granting Con Ed’s motion for summary judgment, the court ordered the Port Authority to reimburse Con Ed $17.6 million for the cost of rebuilding the substation. In so ruling, the court rejected the Port Authority’s argument that it should not have to turn over to Con Ed the insurance proceeds for the substation until the Port Authority’s insurers had paid out its entire claim under the blanket insurance policy. The court noted that the “Port Authority’s principal argument would exploit its decision to purchase a blanket insurance policy and enable the Port Authority to frustrate Con Edison’s right to the proceeds of coverage that its premiums had funded.”
For a copy of the decision, click here
By Carrie P. Appler and Michael T. Glascott