Thank you for sharing!

Your article was successfully shared with the contacts you provided.
The owner of the Cond� Nast building at Four Times Square in Manhattan Thursday won a temporary stay that prevents the building’s mortgage holder from collecting millions of dollars to pay for a terrorism insurance policy. The order from Appellate Division, 1st Department Justice Betty Weinberg Ellerin came hours after a Manhattan judge authorized the mortgage holder, LaSalle National Bank, to seize $3.2 million in rent collected by the building owner to pay a one-year premium on a terrorism policy. Two weeks ago, the bank notified the owner of the 47-story building, Four Times Square Associates LLC, that it was in default on its $430 million mortgage because its insurance policy no longer covered acts of terrorism. The owner pays a $500,000 yearly premium for an “all risk” policy, which was recently amended to exclude terrorism. Upon receiving the default notice, lawyers for the building immediately went to court, where they received a temporary restraining order from Manhattan Supreme Court Justice Harold Tompkins that prevented LaSalle from paying for the additional policy with a portion of the building’s $88 million in annual rent. But Thursday the judge partially vacated the interim injunction after hearing arguments in Four Times Square Associates LLC v. CIGNA Investments Inc., 107745/00, saying that although the court may find that the owner does not have to purchase additional insurance for terrorism, the potential harm in not having the coverage outweighed the cost of paying for the policy until the case is decided on the merits. “While $3 million is significant, it is monetarily compensable and therefore not irreparable,” said the judge, who ruled from the bench. “It is also recoverable in the event plaintiff prevails.” Tompkins added: “In the current circumstances, terrorism insurance which was inexpensive prior to Sept. 11 is now at a premium price. It is however available and it is prudent for an owner to require it.” The ruling authorized LaSalle to seize the money from a lockbox in the building operated by Bank of New York, which was also named in the action brought by Four Times Square Associates. The order was scheduled to go into effect at 3 p.m. Thursday, but was put on hold by Ellerin’s ruling. Warren A. Estis of Rosenberg & Estis, one of the lawyers representing Four Times Square Associates and a regular New York Law Journal columnist, said his client’s mortgage requires that it have an all-risk insurance policy. But, he said, the mortgage says nothing about whether coverage for terrorism must be included. He said the new policy is identical to the old one excepting terrorism coverage, and added that the former policy had other exceptions, such as war. “The only description in the mortgage is ‘all risk’,” he said. “They didn’t specify terrorism and they didn’t take into consideration that conditions could change.” He said his client, whose lease is 2 years old, is not in default, and should not be forced to buy terrorism insurance until there is a final ruling by the court on the requirements of the contract. Thomas F. Munno of Dechert, who is representing LaSalle National Bank, did not return calls seeking comment. Estis said that if Four Times Square Associates does go into default for lack of insurance, the mortgage requires that the mortgage servicing agency, CIGNA Investments Inc., purchase the insurance and then collect the money from Four Times Square with interest 2 percent above prime. By going into default, the owner would also give the bank access to the lockbox where rent is paid by tenants, which include Cond� Nast, a publisher of national magazines, and the law firm Skadden, Arps, Slate, Meagher & Flom, he said. Estis said he brought a letter of credit for $3.5 million to Justice Tompkins Thursday, arguing that if LaSalle won a decision on the merits it could take the bond to cover the insurance. In the meantime, LaSalle could purchase additional insurance if it wished. “They are willing to try to force us to pay, but they won’t gamble and put their money up,” Estis said. He said that during Thursday’s arguments before Tompkins, LaSalle suggested that a terrorism policy covering $400 million would cost between $4.5 million and $5 million a year. Deborah B. Beck, the executive vice president of the Real Estate Board of New York, a trade organization, said that the dispute between Four Times Square and LaSalle illustrates the financial hardships facing both the real estate and insurance industries since Sept. 11. “This is a perfect example of why we need government intervention ASAP,” she said. “Until this gets resolved in Congress, it’s going to be replicated all over the country.” The House of Representatives has passed a bill, H.R. 3210, that would require insurers and policy holders to repay the federal government for its coverage of losses related to terrorism. In the Senate, both Democrats and Republicans agree that the federal government, rather than insurance companies, should cover damages resulting from a terrorist attack, but the two sides are wrangling over the limits to damages that victims and lawyers could collect from insurers and businesses. Beck said that as the debate goes on, both sides in actions like the one involving Four Times Square will be “squeezed”: owners because they can not provide what lenders want, and lenders because they have a responsibility to their certificate holders. Justice Tompkins is scheduled to hear oral arguments on Four Times Square’s motion for an injunction against the default notice on May 15. Estis said written submissions on a permanent stay of Tompkins’ ruling on the lockbox are due May 10.

This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.

To view this content, please continue to their sites.

Not a Lexis Advance® Subscriber?
Subscribe Now

Not a Bloomberg Law Subscriber?
Subscribe Now

Why am I seeing this?

LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.

For questions call 1-877-256-2472 or contact us at [email protected]


ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.