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Zurich off the hook for crane damaged in Superstorm Sandy

Posted On: Feb. 15, 2017 2:11 PM CST

A Zurich Insurance Group Ltd. unit is not obligated to provide coverage in connection with a crane damaged during 2012’s Superstorm Sandy under a policy exclusion, says New York’s highest court in affirming a lower court ruling.

New York-based Lend Lease (US) Construction LMB Inc., the construction manager on a 74-story skyscraper on West 57th Street in Manhattan had arranged with another firm to furnish and install two diesel tower cranes, according to Tuesday’s ruling by the New York Court of Appeals in Albany in Lend Lease (US) Construction LMB Inc. et al. v. Zurich American Insurance Co. et al.

On Oct. 29, 2012, when Superstorm Sandy made landfall, the crane’s boom collapsed, and it “teetered precariously” from the building’s top, causing the blocks surrounding the building to be evacuated for six days, according to the 6-0 ruling.

The company building the skyscraper, New York-based Extell West 57th Street L.L.C., had a total of $700 million in builder’s risk insurance coverage among five insurers, including Schaumburg, Illinois-based Zurich American, which had assumed half the aggregate risk, according to the ruling.

Zurich American denied coverage for the claim, and Lend Lease filed suit. A contractor’s tools exclusion applied, said the New York Court of Appeals ruling, in affirming a ruling by New York appellate division that Zurich was not obligated to provide coverage.

The Zurich policy included an exclusion for losses to “contractor’s tools, machinery, plant and equipment” that is not destined to become a permanent part of the insured project, said the ruling. Although Extell contended the crane is not a tool or equipment, the exclusion “also defeats coverage for machinery, and the crane falls squarely within the definition of that term,” said the ruling.

Extell submitted evidence that crane components were to remain a permanent part of the building, but these consisted primarily of reinforcements and ties, not the crane’s principal parts, said the ruling. 

“To that end, we conclude the contractors’ tools exclusion applies to the crane,” the ruling said.