Opinion
No. 01 Civ. 9291 (JSM).
June 4, 2002
OPINION AND ORDER
The scope of this litigation has been described in an Opinion Order filed in this action on June 3, 2002, and familiarity with that opinion is assumed. Presently before the Court is a motion by Counterclaim-Defendant Zurich American Insurance Company for judgment on the pleadings declaring that its maximum total liability can not exceed $45,670,000.
Zurich is one of twenty-four insurers that signed binders agreeing to provide property damage: Insurance for the World Trade Center. It argues that the binder that it signed on July 25, 2001, did not state that the insurance was being provided on a per occurrence basis and, therefore, that the Court must conclude that it was agreeing to a maximum liability of $45,670,000, regardless of the number of occurrences.
The Court agrees with the insureds that the issue of whether Zurich was providing coverage on a "per occurrence" basis can not be resolved without resort to extrinsic evidence. New York law is clear that, unlike more traditional contracts, with respect to which the courts will not look outside the four corners of the agreement to determine the intent of the parties, binders will be construed to contain clauses customary in the insurance industry. As stated in Ell Dee Clothing Co. v. Marsh, 247 N.Y. 392, 396 (1928):
A "binder" is a present contract of insurance issued to protect the assured temporarily while the assurer investigates the risk and determines whether or not to issue a permanent policy. Imported into it, however, are all the obligations "according to the terms of the policy in ordinary use by the company." (Sherrie v. National Surety Co., 243 N.Y. 266.) If the form of the policy is fixed by the State, then its provisions are held to be included in any binder. If there is proof that the company has adopted any particular and customary form the same thing is true.
(Emphasis added).
Similar reasoning is found in the opinion of the Court of Appeals inEmployers Commercial Union Ins. Co. v. Firemen's Fund Ins. Co., 45 N.Y.2d 608, 612-13 (1978), in which the Court stated:
Daily, important affairs and rights in our society are made to depend upon [insurance binders]. It is a common and necessary practice in the world of insurance, where speed often is of the essence, for the agent to use this quick and informal device to record the giving of protection pending the execution and delivery of a more conventionally detailed policy of insurance. Courts, recognizing that the cryptic nature of binders is born of necessity and that many policy clauses are either stereotypes or mandated by public regulation, are not loath to infer that conditions and limitations usual to the contemplated coverage were intended to be Part of the parties' contract during the binder period. (Matter of Seiderman v. Herman Perla, Inc., 268 N.Y. 188; Ell Dee Clothing Co. v. Marsh, 247 N.Y. 392).
(Emphasis added).
It is, at a minimum, an issue of fact as to whether the custom and practice of the insurance industry, or Zurich's own customary policy form, would have caused Zurich and its insureds to understand that the property damage insurance that Zurich was binding itself to provide was being written on a "per occurrence" basis.
For the foregoing reasons, Zurich's motion for judgment on the pleadings is denied.