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Asking for a preliminary injunction against its mortgage holder, the owner of the Cond� Nast building Wednesday told a Manhattan judge that it should not be required to spend millions of dollars on terrorism insurance. An attorney for the owner, the Durst Organization, said that forcing the company to pay for a terrorism policy would cause irreparable harm and jeopardize financing that the company needs for a new project on West 57th Street in New York City. But an attorney for the mortgage holder, LaSalle National Bank, countered that there would be no harm in forcing Durst to purchase the policy. The company, he argued, could later recover the money if the court eventually decided in its favor. The court appearance was the most recent in a dispute that would have been unthinkable in the world of real estate before Sept. 11, but now, members of the real estate industry say, might become commonplace without congressional intervention. The Cond� Nast building, located at Four Times Square and home to the publisher of The New Yorker and the law firm Skadden, Arps, Slate, Meagher & Flom, generates $88 million in rent annually for Durst. In April, LaSalle told Durst that its insurance policy no longer covered acts of terrorism and that Durst had gone into default. Durst says its mortgage with LaSalle does not clearly specify that it needs to insure the building against terror. Durst immediately took LaSalle to court, where it won a temporary restraining order that prevented the bank from seizing $3.2 million to pay a one-year premium on a terrorism policy. But after arguments on May 3, Manhattan Supreme Court Justice Harold Tompkins modified the restraining order, in effect giving LaSalle access to the lock box where Durst keeps its rent payments. The judge said that the potential harm in not purchasing coverage outweighed the cost of purchasing the policy while the court decided the case. Before the day was out, however, Durst staved off the ruling by securing a temporary stay from Justice Betty Weinberg Ellerin of the Appellate Division, 1st Department. With that temporary stay still in effect, the two sides appeared before Tompkins Wednesday to argue the merits of a preliminary injunction. Warren A. Estis of New York’s Rosenberg & Estis, who is representing Durst, argued that Durst’s mortgage with LaSalle does not clearly specify that the company needs to insure the $430 million building against terrorism. Durst has maintained an “all risk” policy on the building since its construction, but its latest policy, amended in April, specifically excludes terrorism. Estis, who is a regular New York Law Journal columnist, has argued that if LaSalle wants terrorism insurance on the building, it, or its servicing company, Cigna Investments, should purchase the policy. Durst has offered to give LaSalle a $3.5 million bond to cover the policy if the court decides the case in LaSalle’s favor. Justice Tompkins expressed uncertainty about the irreparable harm and asked whether the cost of the policy would simply be passed on to the tenants of the building. Thomas F. Munno of Dechert, who represents LaSalle, said that Durst would not be harmed by purchasing the insurance because it could bring a suit for money damages if Tompkins found that it was not required to pay for the policy. “They have the ability to buy the insurance and prevent default,” Munno said. Munno stressed that terrorism insurance was available, and said that Durst “can’t show [irreparable harm] because at the end of the day they can be compensated.” Charles G. Moerdler of New York-based Stroock & Stroock & Lavan, who represents the mortgage’s certificate holders, expressed concern in court Wednesday that his clients, who took a stake in the mortgage before Sept. 11, might be unfairly put upon by the insurance industry. “We as the certificate holders have no moral obligation to support [the insurance industry's] marketing efforts,” Moerdler said. He argued that the court should make a decision on the merits before requiring that terrorism insurance be purchased. In an interview, Moerdler explained that if Cigna Investments buys a terrorism policy with Durst’s money and is later determined to be in the wrong, the servicing agent has the right to pass the cost of the policy on to the certificate holders in order to repay Durst. Munno responded that it was not LaSalle’s intent to get the money from the certificate holders. He stressed that if a terrorist attack were to occur, the certificate holders could be severely harmed. Tompkins said he planned to issue a ruling on the preliminary injunction before the court’s summer recess. The 1st Department’s stay applies only to Tompkins’ temporary restraining order. If the judge does not grant a preliminary injunction, Durst will have to appeal the 1st Department again.

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