'No Terrorism' Insurance Policy Insufficient

Facts: A tenant entered into a lease agreement that required the purchase of insurance coverage for damages as a result of specific harms including smoke, riot, crashing airplanes, and “civil commotion.” The lease agreement did not specifically require coverage for terrorist attacks. The tenant purchased a post-September 11 insurance policy that included an explicit exception for all damage as a result of terrorism.

The owner responded by informing the tenant that it had defaulted on its lease for a lack of sufficient insurance and that the owner had purchased supplemental insurance for the building. The tenant sued the building owner, claiming that the tenant had purchased coverage for the list of harms enumerated in the lease.

The trial court ruled for the owner, and the tenant appealed and won. The owner then asked the state's highest court, the New York Court of Appeals, to reverse the appellate court's decision.

Decision: The New York Court of Appeals reversed the appellate court's decision and ruled in favor of the owner.

Reasoning: The court found that the insurance policy the tenant purchased was in breach of the lease agreement because it covered the various harms listed in the lease, yet excluded them if they were the result of terrorism. The policy was insufficient because it restricted the cause of any potential damages. Also, the court found that the insurance policy violated Section 3404 of the Insurance Law of New York because it did not meet the minimum level of coverage required by the law.

• Tag 380 LLC v. ComMet 380, Inc., June 2008