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BANK OF TAIWAN NEW YORK AGENCY v. GRANITE STATE INS. CO.

July 9, 2003

BANK OF TAIWAN NEW YORK AGENCY, HUA NAN COMMERCIAL BANK, LTD NEW YORK AGENCY & TAIPEI BANK NEW YORK AGENCY, PLAINTIFFS,
v.
GRANITE STATE INSURANCE COMPANY, DEFENDANT.



The opinion of the court was delivered by: Andrew Peck, Magistrate Judge

REPORT AND RECOMMENDATION

This suit arises from identical insurance policies (the "Policy") that the Bank of Taiwan, Hua Nan Commercial Bank, and Taipei Bank (collectively, "the Banks") purchased from Granite State Insurance Company ("Granite") to cover the Banks' offices in the World Trade Center. (Dkt. No. 1: Compl. ¶¶ 1, 19-24.) After the World Trade Center was destroyed by the September 11, 2001 terrorist attacks (Compl. ¶ 27-28), the Banks submitted insurance claims and Granite compensated them for the actual cash value, but not the replacement cost, of the improvements made to their offices. (E.g., Compl. ¶¶ 1, 6, 9.) The Banks sued, seeking, inter alia, the replacement cost of the leasehold improvements pursuant to the Policy. (Compl. ¶ 4.) Granite refused to pay replacement cost on the ground that upon installation the improvements became the property of the lessor, the Port Authority, and therefore were not covered by the Policy's replacement cost provision. (Compl. ¶ 32 & Ex. D.) Presently before the Court are the parties' cross-motions for summary judgment to interpret the unambiguous terms of the Policy. (Dkt. Nos. 13, 17-19, 21: Banks S.J. Papers; Dkt. Nos. 14-16, 20: Granite S.J. Papers.)

For the reasons set forth below, Granite's summary judgment motion should be GRANTED and the complaint dismissed.

FACTS

The Insurance Policy

Bank of Taiwan, Hua Nan Bank, and Taipei Bank each purchased a "Commercial General Liability Insurance Policy, including Commercial Property Coverage" (the "Policy") from Granite (Dkt. No. 1: Compl. ¶¶ 1-4 & Exs. A-C),*fn1 which reads, in relevant part:

A. COVERAGE

We will pay for direct physical loss of or damage to Covered Property at the premises described in the Declarations caused by or resulting from any Covered Cause of Loss.
1. Covered Property
b. Your Business Personal Property located in [the Premises] . . . consisting of the following . . .:
1) Furniture and fixtures;

2) Machinery and equipment;

3) "Stock";

4) All other personal property owned by you and used in your business;
6) Your use interest as tenant in improvements and betterments. Improvements and betterments are fixtures, alterations, installations or additions:
a) Made a part of the building or structure you occupy but do not own; and
b) You acquired or made at your expense but cannot legally remove;
c. Personal Property of Others that is:

1) In your care, custody or control; and

2) Located in or on [the Premises]. . . .

E. LOSS CONDITIONS

7. Valuation

We will determine the value of Covered Property in the event of loss or damage as follows:
a. At actual cash value as of the time of loss or damage, except as provided in b., c., d., e. and f. below.
e. Tenant's Improvements and Betterments at:
1) Actual cash value of the lost or damaged property if you make repairs promptly.
2) A proportion of your original cost if you do not make repairs promptly. We will determine the proportionate value as follows:
a) Multiply the original cost by the number of days from the loss or damage to the expiration of the lease; and
b) Divide the amount determined in (a) above by the number of days from the installation of improvements to the expiration of the lease.
If your lease contains a renewal option, the expiration of the renewal option period will replace the expiration of the lease in this procedure.
3) Nothing if others pay for repairs or replacement.
G. OPTIONAL COVERAGES

If shown in the declarations, the following Optional Coverages apply ...


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