Feb. 18, 2017

Court of Appeals Declares that No Insurance Coverage Exists for Tower Crane Damaged During Superstorm Sandy

In Lend Lease (US) Construction LMB Inc. v Zurich American Insurance Company (No. 11) previewed here, the owner and construction manager of a 74-story high rise being built in midtown Manhattan sought coverage for damage caused to the tower crane being used to build the building during Superstorm Sandy in October 2012. Zurich, one of the insurers of the property, disclaimed coverage on the grounds that the tower crane was not covered property and fell within one of the policy's exclusions for "[c]ontractor's tools, machinery, plant and equipment including spare parts and accessories..., and property of a similar nature not destined to become a permanent part of the INSURED PROJECT...."

The Court of Appeals held that, although a question of fact existed concerning whether the tower crane was covered under the insurance policy in the first instance, there was no question that the crane fell within the policy's "contractor's tools" exclusion from coverage. As the Court held, the crane was clearly machinery that was used solely for the purpose of constructing the building and was not intended to become a permanent part of the construction project. Thus, the Court held, no insurance coverage existed for the damage caused to the crane by the storm.

The Court rejected the insured's claim that the "contractor's tools" exclusion was so broad that it rendered the policy coverage for temporary works illusory, because the exclusion did not defeat coverage for all temporary works. The Court noted, "[t]hat exclusion would not defeat coverage initially granted for such things as the cost of erecting scaffolding, for 'temporary buildings,' and for such other things as 'formwork, falsework, shoring, [and] fences,' which are not 'tools' within the meaning of the exclusion." (Opn, at 11-12).

The Court of Appeals' opinion can be found here: