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SR International Business Insurance v. Port Authority el al

(2nd Circuit, July 28, 2009)


In the ongoing coverage litigation relating to the World Trade Center tragedy, SR International Business Insurance Co., Ltd. v. Allianz Insurance Company,   the Second Circuit, applying New York law, held that a dispute between the insurer and the insured regarding priority of recovery for World Trade Center losses was ripe for adjudication.  The insured claimed that the matter was un-ripe because, among other things, it was possible that neither party would succeed in proving damages in the tort litigation.  Rejecting that claim, the Second Circuit held that the matter was one of pure contract interpretation, and did not require further factual development before being decided. 

The Second Circuit went onto reject the insured’s secondary argument:  that the insured was entitled to priority in recovery against the tortfeasor based upon the “application of recoveries” clause in the excess policy at issue. The excess policy incorporated the subrogation clause in the primary policy, which provided that the insurer was entitled to priority of recovery against third parties. The insured argued that an “application of recoveries” clause in the excess policy, instead of allowing the insurer to offset amounts owed to the insured, required the insurer to turn over the proceeds of any subrogation actions to the insured and rendered its claim primary to the insurer’s.  Calling the insured’s interpretation “tortured,” it held that the “application of recoveries” clause was separate and had no impact on the priority of subrogation. Based on the plain language of the subrogation clause, the insurer’s claim was primary.


For a copy of the decision, click here


By Sarah J. Delaney and Joanna M. Roberto