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385 C HAPTER 49 I NSURANCE A NSWER TO Q UESTIONS AT THE E NDS OF THE C ASES CASE 49.1—QUESTIONS (PAGE 1012) 1A. On what issue was the court asked to rule in this case? Zurich (the in- surer) filed a suit in a federal district court against ABM (the insured) to determine the extent of Zurich’s liability for ABM’s claims under its policy for losses related to the de- struction of the World Trade Center in the terrorist attack of September 11, 2001. Specifically, the court focused on whether ABM had a sufficient insurable interest to re- cover under the policy. Zurich essentially argued in part that ABM could not recover because it did not own or lease the premises. 2A. On what did the court base its reasoning for its ruling on this issue? The U.S. Court of Appeals for the Second Circuit pointed out that “[t]he terms of the insurance policy . .. do not limit coverage to property owned or leased by the insured. To the contrary, the policy’s scope expressly includes real or personal property that the insured ‘used,’ ‘controlled,’ or ‘intended for use.’” Further, under New York state law, an insurable interest is “any lawful and substantial economic interest in the safety or preservation of property from loss, destruction or pecuniary damage.” In this case, “ABM’s income stream is dependent upon the common areas and leased premises in the WTC complex, and thus ABM meets New York’s requirement of having an ‘insurable interest’ in that property.” ABM could thus recover for its losses under the policy. CASE 49.2—WHAT IF THE FACTS WERE DIFFERENT? (PAGE 1016) Suppose that there had not been an ambiguity in this policy and that it had been subject to only one reasonable interpretation. Would the result have been different? Explain. The ambiguity in this policy and its susceptibility to two reasonable interpretations were the bases for the court’s conclusion in this case that the policy covered Dena’s injury. Had there been no ambiguity and only one interpretation had been plausible, if that interpretation would have directed a result for the insurer, the court would likely have ruled that the policy did not cover the injury. If the interpretation would have indicated a result for the insured, however, that would have likely been the court’s ruling, and the result would not have been different.
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386 UNIT ELEVEN: SPECIAL TOPICS THE LEGAL ENVIRONMENT DIMENSION Should insurance policy provisions be read to avoid ambiguities if possible Why or why not? Yes. In the words of a dissenting opinion in the Cary case, “the language should not be tortured to create ambiguities. . .. [T]he guiding fundamental principle of contract interpretation [is] that while ambiguities are reconciled in the insured's favor, courts may not invent ambiguity and have no warrant to stretch language, through strained construction, to find against the insurer." No, because while ambiguities should not be “invented,” they should not be ignored when most likely they
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