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The owner of the Cond� Nast building in Times Square on Thursday lost the latest round in its back-and-forth fight over terrorism insurance, after a Manhattan judge ruled that it must put up millions of dollars until its lawsuit is resolved. Manhattan Supreme Court Justice Harold Tompkins denied a preliminary injunction requested by the Durst Organization that would have prevented LaSalle National Bank, the building’s mortgage holder, from seizing money to cover the premium on a terrorism insurance policy. The policy will cost an estimated $3.5 million to $5 million a year for $400 million in coverage. Tompkins reasoned that the insurance premium could be recovered by Durst through a lawsuit if the company proved at trial that its mortgage agreement does not require it to buy terrorism insurance. The judge rejected Durst’s argument that it would suffer irreparable harm — including constraints on financing for other developments — if it was forced to pay for a policy while the trial took place. Tompkins said in Four Times Square Associates LLC v. Cigna Investments Inc., 107745/02, that while a terrorism premium was “a significant cost, this harm is monetarily compensable and therefore not irreparable under the standard for an injunction.” Tompkins noted in a footnote that Durst, which owns the building through a related entity, Four Times Square Associates LLC, might be able to pass the cost of the policy onto its tenants, which include the New York law firm Skadden, Arps, Slate, Meagher & Flom. He also noted that Durst obtained $100 million in terrorism insurance on May 8 for $500,000, on the condition that it had the right to seek recovery. The Cond� Nast building is valued at about $877 million, and takes in about $88 million annually in rent. Tompkins said a stay would remain in effect until today at 5 p.m., at which time LaSalle and its loan administrator, Cigna Investments, could gain access to the building’s rent. The judge’s ruling was consistent with his earlier findings in the case, including a ruling in May that authorized LaSalle to seize money from a Durst account where the building’s tenants deposit rents. That ruling was stayed by the Appellate Division, 1st Department, pending Tompkins’ final ruling on the preliminary injunction motion. Warren A. Estis of Rosenberg & Estis, who is representing Four Times Square, said his clients would seek a stay of Thursday’s ruling from the1st Department before Justice Tompkins’ stay expired. Four Time Square’s fight with LaSalle began in April, when the company negotiated a new “all risk” insurance policy with Lexington Insurance Company, a division of AIG, for $500,000 a year. That policy excluded terrorism. The building’s previous policy had included terrorism for a similar price. Cigna immediately notified Four Times Square that it would go into default on its $430 million mortgage if it did not purchase a separate policy to cover acts of terrorism. Four Times Square argued that its mortgage agreement did not specifically require it to buy terrorism insurance, just an “all risk” policy, which it had done. Justice Tompkins found, however, that the mortgage agreement between the two parties does allow LaSalle to demand coverage of additional risks under certain circumstances. “Whether terrorism insurance is, in the new post-Sept. 11, 2001 world, part of the new custom of business, generally available at commercially reasonable premiums is a question of fact,” Tompkins wrote. The judge also said he was skeptical of Four Times Square’s claim that its fire coverage would help to cover a terrorist attack, writing that “the court recognizes that terrorist attacks can unfortunately take many forms including radiological, chemical, biological and others in addition to an explosion.” INJUNCTION NOT NECESSARY In his conclusion, Tompkins emphasized that Four Times Square had already purchased $100 million in terrorism insurance from AIG for $500,000, saying that the company’s action indicated that an injunction was not necessary. Estis, who is a regular Law Journal columnist, said Four Times Square made a “business decision” to purchase the insurance from AIG, which offered it for $500,000 for a limited 30-day period. He said AIG has since said it will no longer sell terrorism insurance. Members of the real estate industry have expressed fears that disputes like the one before Justice Tompkins will become widespread if the government does not promise to back insurance companies with federal money in the event of another terrorist attack in the United States. Last week, Bloomberg News reported that GMAC Commercial Mortgage, a division of General Motors, had sent letters to borrowers giving them two weeks to purchase terrorism insurance or face the possibility of going into default. In response to growing pressure from industry groups and President Bush, the U.S. Senate this week passed legislation that would require the government to pay 80 percent of terrorism-related claims, for two years, up to $10 billion, and 90 percent for claims over $10 billion. The bill, which was supported by both Senators Charles Schumer, D-N.Y., and Hillary Rodham Clinton, D-N.Y., is headed for a conference committee with the House of Representatives. LaSalle National Bank was represented by Thomas F. Munno of Dechert. Charles G. Moerdler of Stroock & Stroock & Lavan represented Durst Building, Durst 14 and Durst Foundation, which hold $20 million in certificates for the building. Justice Tompkins allowed those certificate holders to intervene as plaintiffs. Estis said no date had been set for a trial.

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