NEW YORK, N.Y., May 17 – The United States District Court for the Southern District of New York held on May 10 that ABM Industries Inc., a firm that provided engineering and janitorial services to the World Trade Center prior to 9/11, was entitled to a period of restoration equal to the time it would take to rebuild the WTC on its loss of income insurance claim arising from the attacks of September 11, 2001 (Zurich American Insurance Co. v. ABM Industries, Inc., No. 01 Civ. 11200 (JSR)).

The court thus granted in part ABMs motion for summary judgment and denied the motion for partial summary judgment on this issue filed by Zurich American Insurance Company, according to the law firm Anderson Kill & Olick, P.C., which represented ABM. The court also denied the parties cross-motions on ABMs extra expense claim and civil authority claim, concluding that genuine issues of material fact remained for trial on both of those coverages.

ABM Services Defined

Anderson Kill explained that ABM provided various janitorial, electrical and engineering services for Silverstein (the WTC landlord) and tenants of the WTC, in the common and tenanted areas respectively. The WTC was one of several buildings in New York City in which it provided such services to the landlord, as well as services to the buildings tenants.

At issue in the decision, noted Anderson Kill, was whether ABMs loss of income from destruction of the WTC was limited to the time it would take ABMs tenant-customers to relocate to replacement premises, or the time it would take the WTC to be rebuilt.

Previous Cases Not Applicable

Previously, Anderson Kill explained, the United States Court of Appeals for the Second Circuit held that ABMs claim was one for business income, rather than merely for contingent business income, which had a sub-limit of $10,000,000 in the insurance policy sold by Zurich. At issue was whether ABMs loss of income from destruction of the WTC was covered as Business Income " loss from property used or controlled by ABM " or as Contingent Time Element (Contingent Business Income) " loss from property not operated by ABM, but rather by ABMs customers.

In supporting the Business Income claim, the District Court noted that the Second Circuit had ruled that ABM had an insurable interest in not only the spaces occupied by the tenants, but also, inter alia,the public common areas.

Anderson Kill said that the District Court thus concluded that the ABM case was different from that of the policyholders in Duane Reade, Inc. v. St. Paul Fire & Marine Ins. Co., and Streamline Capital, L.L.C. v. Hartford Casualty Insurance Co., both of which held that the period of restoration for those policyholders business income claims was the time it would take those policyholders to relocate to replacement premises, rather than the much longer time that it would take to rebuild the WTC, because those courts concluded that the insured property was the plaintiffs personal property at the [WTC].

Here, instead, the court held that the nature of ABMs business is fundamentally different from that of either of the plaintiffs in those cases. Unlike Duane Reade and Streamline Capital, ABM cannot simply relocate to another building and carry on its business. To the contrary, ABMs business was, as the Court of Appeals recognized, fundamentally connected to its use of the common space as the [WTC].

The court further held that, in contrast to the position of Duane Reade and Streamline Capital, restoration of the [WTC] itself is necessary [for] ABM to resume its operations.

Anderson Kill said that the court further distinguished Duane Reade and Streamline because those decisions were based, in part, on those courts not wanting to tie the period or restoration to a process over which neither the policyholders nor insurance companies in those cases had any control " the rebuilding of WTC.

For ABM, however, the nature of [its] business is such that it is impossible to tie the recovery period to a process over which the parties have control. The court added, under Zurichs theory, if all of the WTC tenants immediately relocated to other buildings that ABM did not service, ABMs business would remain interrupted, but it would be unable to recover damages under the Business Interruption provision of the policy, a result the parties could hardly have intended.

The court reserved for trial exactly how long it would take to rebuild the WTC, and whether ABM could recover throughout that period. Further, Anderson Kill noted, the court held that questions of fact remained on ABMs claims for extra expense and civil authority coverage.