Omni Berkshire Corp. v. Wells Fargo Bank, N.A.
United States District Court for the Southern District of New York
307 F.Supp.2d 534 (2004)
Omni Berkshire Corp. (Omni) (plaintiff) borrowed $250 million in 1998. The loan was serviced by Wells Fargo Bank, N.A. (Wells Fargo) (defendant). Wells Fargo required the borrowers for all the loans it serviced to carry “all risk” insurance for the loan. The loan agreement between Wells Fargo and Omni contained such a provision requiring Omni to obtain all risk insurance. The loan agreement also provided that Wells Fargo could reasonably request “other reasonable insurance” in “reasonable amounts” against additional hazards not covered by the all-risk policy. At the time of signing the agreement, Wells Fargo required Omni to also obtain flood and earthquake coverage. Wells Fargo and Omni did not discuss insurance for acts of terrorism, but Omni’s all risk policy included such coverage. On September 11, 2001, the United States was attacked by terrorists in New York City. Following this event, many all risk insurance policies began excluding terrorist acts from coverage. When Omni renewed its policy in March 2002, its new all risk policy did not contain coverage for terrorist acts. Omni received a quote for $60,000 million in coverage for a separate terrorist act policy. The cost to Omni would be $316,000 per year for the life of its loan with Wells Fargo. Omni determined this was too expensive, and informed Wells Fargo it would not be purchasing terrorist act coverage. Wells Fargo objected, and Omni brought suit in federal district court seeking a declaratory judgment that it was not required to obtain a separate insurance policy covering terrorist acts.
Rule of Law
Holding and Reasoning (Chin, J.)
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