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ZURICH AMERICAN INSURANCE COMPANY v. ABM INDUSTRIES

May 28, 2003

ZURICH AMERICAN INSURANCE COMPANY, PLAINTIFF,
v.
ABM INDUSTRIES, INC., DEFENDANT.



The opinion of the court was delivered by: Jed Rakoff, District Judge

MEMORANDUM ORDER

As of September 11, 2001, defendant ABM Industries, Inc. ("ABM") was responsible for providing janitorial and related services for most of the World Trade Center complex. Plaintiff Zurich American Insurance Company ("Zurich") was ARMY's insurer. This declaratory judgment action seeks to determine the extent of Zurich's liability to ABM as the result of the World Trade Center's destruction.

Presently pending before the Court are the parties' respective motions for partial summary judgment, as well as ABM's post-discovery motion to amend its pleadings to add an additional counterclaim. For the following reasons, Zurich's motion is granted and ABM's motions are denied.

It is undisputed that at all times here relevant ABM provided janitorial, lighting, and engineering services to the public common areas of the World Trade Center, and also provided at least janitorial services to approximately ninety-seven percent of the tenants in the World Trade Center. See Affidavit of Mary E. Borja sworn to July 18, 2001 ("Borja Aft."), Exh. 27 (Deposition of Nikoll Vataj, June 5, 2002), at 35-36; Affidavit of Mary E. Borja sworn to July 9, 2002 ("Borja Supp. Aff."), Exh. 18 (Deposition of Fred Wolsleger, June 3, 2002) at 21, Exh. 21 (Deposition of Terry D. McNeil, May 29, 2002) at 25-26. Additionally, ABM itself occupied office and storage space in the World Trade Center, had access to the janitorial closets and sinks located on every floor of the World Trade Center, and enjoyed exclusive after-hour use of the World Trade Center's freight elevators. See Borja Aff., Ex. 15 (Email from Debra L. Butler, May 23, 2002) at ABM022692, Exh. 23 (McNeil Dep.) at 28-31, Exh. 27 (Vataj Dep.) at 57-58, 60-61.

Pursuant to insurance policy number MLP 8339383-05 (the "Policy"), purchased by ABM from Zurich at an annual premium of $224,591, Zurich agreed to insure ABM for the period from February 1, 2001 through February 1, 2002. See Borja Supp. Aff., Exh. 1 (the Policy). The Policy provided coverage to ABM for, inter alia, loss or damage to ABM's "real and personal property," including "property owned, controlled, used, leased or intended for use" by ABM, § 7(A)(1); "loss resulting directly from the necessary interruption of [ABM's] business caused by direct physical loss or damage to insured property at an insured location," § 7(B)(1); "Extra Expense incurred" by ABM as a result of "loss, damage, or destruction to [ABM's] real or personal property," § 7(C)(1); and lasses related in various specified ways to: "off premises utility and power stations," § 7(F)(1), "properties not operated by [ABM]," § 7(F)(2), "Impounded Water," § 7(F)(3), "Leader Property," § 7(F)(4), "Interruption by Civil or Military Authority," § 7(F)(5), and "Ingress/Egress," § 7(F)(6).

Against this background, the Court hereby makes the following determinations of law:

First, ABM cannot recover under § 7(B)(1) of the Policy for any business interruption loss claimed by ABM as a result of the destruction of the World Trade Center premises it served but did not otherwise occupy (i.e. the tenants' premises and the public common areas), but only for business interruption loss caused by the destruction of the World Trade Center space that ABM itself occupied or caused by the destruction of ABM's own supplies and equipment located in the World Trade Center.

In this regard, Section 7(B)(1) of the Policy provides that:

Subject to all other provisions of this policy, this policy insures against loss resulting directly from the necessary interruption of business caused by direct physical loss or damage, not otherwise excluded, to insured property at an insured location.
"Insured property," in turn, is effectively defined by § 7(A)(1) of the Policy, which extends basic coverage to:
The interest of the Insured in all real and personal property including but not limited to property owned, controlled, used, leased or intended for use by the Insured . . .
Seeking to squeeze within the limits of this definition, ABM argues that it "used" the common areas and tenanted premises of the World Trade Center to perform its operations and generate income. See ABM's Memorandum of Law in Support of its Motion for Partial Summary Judgment, at 21; see also Transcript, May 15, 2002, at 21. However, the plain meaning of "use" as employed in § 7(A)(1) is "to carry out a purpose or action by means of." Webster's Third New International Dictionary of the English Language Unabridged 2524 (2002). Thus, for instance, ABM could carry out its purpose of cleaning its customers' premises by means of a mop, broom, or other cleaning tool, and could carry out its purpose of generating income by means of the work it performed. ABM, however, did not accomplish any purpose "by means of" the property here in issue, viz., the physical premises occupied by tenants or open to the general public. Such premises were the locations of ABM's acts, not the means through which the acts were accomplished. Furthermore, even if ABM could somehow be said to have "used" the property in issue, it did not thereby acquire any legally cognizable "interest" in the property.

ABM's fallback argument that ABM somehow "controlled" such premises at the World Trade Center is even more far-fetched. To "control" is "to exercise restraining or directing influence over" or "to have power over." Webster's Third New International Dictionary of the English Language Unabridged at 496. While no one questions the importance of janitorial services in modern urban society, the notion that by providing such services to a building's owner or tenants the janitor thereby "controls" the building is the functional equivalent of saying that the ground crew "controls" Yankee Stadium. This umpire is not persuaded. Again, moreover, even if ABM could somehow be said to have exercised some kind of "control" over the property here in question, it was not the kind of control that would give ABM a legally cognizable "interest" in the property.

Finally, ABM argues that since § 7(F)(2), the Policy's business interruption provision for uninsured property, extends only to "properties not operated" by ABM, by implication the "insured property" referenced in § 7(B)(1) extends to property that is operated by ABM, regardless of whether or not it falls within the definition of § 7(A)(1), because otherwise there would, supposedly, be a gap in coverage. However, in the absence of any express language in the Policy supporting this contention, ABM's "coverage by implication" argument supplies far too weak an inference to carry the insured's burden of showing that its "claim falls within the terms and conditions" of the Policy. Paul Revere Life Ins. Co. v. Bavaro, 957 F. Supp. 444, 447 (S.D.N.Y. 1997) citing Preferred Accident Ins. Co. v. Grasso, 186 F.2d 987, 990 (2d Cir. 1951)

Moreover, even assuming arguendo that the Policy covered property "operated" by ABM, ABM no more "operated" the premises here in issue than it "owned," "controlled," "used," or "leased" such premises. Specifically, the transitive verb "to operate" has the following meanings:

1: to cause to occur . . . 2 a: to cause to function usu. by direct personal effort . . . b: to manage and put and keep in operation whether with personal effort or not . . . 3: to perform surgery on . . .
Webster's Third New International Dictionary of the English Language Unabridged at 1581. None of these meanings describes ABM's relationship with either the common areas or the tenanted premises in the World Trade Center: ABM did not cause these areas or premises to function, nor did it manage the areas or premises. ABM may have operated the ...

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