News & Events

On March 28th, 2012, Simpson Thacher received a favorable decision in a Chartis reinsurance case pending in SDNY before Judge Deborah A. Batts.  Following the total destruction of the World Trade Center towers and damage to other nearby Port Authority buildings on September 11, 2001, Port Authority sought coverage from its first-party property insurers, including two Chartis subsidiaries, American Home Assurance Company (“American Home”) and Lexington Insurance Company (“Lexington”).  After paying one full occurrence limit, Lexington and American Home settled a dispute with Port Authority over whether there was a “second occurrence” by making an additional payment equal to 30% of their respective occurrence limits. 

Tokio Marine & Nichido Fire Insurance Company (“Tokio Marine”) reinsured 100% of Lexington’s exposure under the Lexington excess policies; however, when Lexington turned to Tokio Marine for reimbursement, Tokio Marine denied the claim contending that Lexington (and, therefore, Tokio Marine) owed no obligation to Port Authority unless and until the full $10 million per occurrence limit of the American Home policy was exhausted for the second occurrence.

In the complaint, Lexington sought in its first cause of action a declaration that its obligation to pay under the excess policy was not dependent on payment by the primary carrier of the full primary limit so long as the total loss exceeded the excess attachment point.  STB filed a motion on behalf of Lexington for judgment on the pleadings with respect to the first cause of action based on a 1928 2nd Circuit precedent (Zeig v. Mass. Bonding) holding that an excess insurer’s obligation is triggered under New York law where the primary insurer settles for less than policy limits so long as the loss exceeds the excess attachment point.  In her decision, Judge Batts granted the motion, adopting the position in STB’s brief that Zeig remains good law and controls the outcome of the case.  The decision nullifies the main defense raised by the reinsurer.  

The Simpson Thacher attorneys who worked on this case include Partner Andrew Amer and associate Joan Flaherty.