Zurich American Insurance Co. v. ABM Industries, Inc.

397 F.3d 158 (2005)

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Zurich American Insurance Co. v. ABM Industries, Inc.

United States Court of Appeals for the Second Circuit
397 F.3d 158 (2005)

  • Written by Rose VanHofwegen, JD
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Facts

ABM Industries, Inc. (ABM) (defendant) provided extensive services at the World Trade Center (WTC), essentially running the physical plant. ABM operated the heating, ventilation, and air-conditioning systems, provided janitorial, lighting, and engineering services, and effectively controlled the service elevators. ABM also had office and storage space, access to janitorial closets, service contracts with nearly all WTC tenants, and more than 800 employees working there. Zurich American Insurance Co. (Zurich) (defendant) provided property and business-interruption (BI) insurance for ABM-serviced properties throughout North America. The policy had a blanket coverage limit of $127 million, with several sublimits. The property-loss provision covered property “owned, controlled, used, leased, or intended for use by the Insured.” The BI provision covered lost income resulting from physical loss or damage to “insured property at an insured location,” subject to only the $127 million cap. A contingent-business-interruption (CBI) clause covered properties “not operated by the Insured,” with a $10 million cap. After 9/11, ABM sought BI coverage for income lost because of the WTC’s destruction. Zurich brought a declaratory action to determine the extent of its liability. The court granted summary judgment, finding the BI coverage applied only to income ABM lost due to the destruction of equipment, supplies, and space ABM actually occupied, meaning the $10 million CBI sublimit capped income lost from the destruction of the common areas and tenant spaces—virtually all ABM’s income from the WTC. ABM appealed.

Rule of Law

Issue

Holding and Reasoning (Cardamone, J.)

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