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Judge rules for Port Authority in asbestos defense involving AIG unit

Judge rules for Port Authority in asbestos defense involving AIG unit

A New York Supreme Court judge has granted partial summary judgment in favor of the Port Authority of New York and New Jersey, holding that an insurer's duty to defend covers an entire underlying action even if only some of the claims fall under the policy.

The ruling involves a case brought by American Home Assurance Co. against the Port Authority, Alcoa Inc., Mario & DiBono Plastering Co. Inc., Tishman Speyer Properties L.P., Tishman Speyer Properties Inc. and other Tishman companies.

The insurer's suit sought a declaratory judgment that it had no duty to defend or indemnify the defendants for asbestos-related injury claims stemming from the construction of the original World Trade Center.

In its motion, the Port Authority said litigation against it alleged injury at the World Trade Center and non-WTC sites, but that American Home Assurance, a unit of American International Group Inc., had unilaterally begun limiting its defense obligations to the portion of defense costs dealing only with World Trade Center-related claims.

American Home opposed the motion. It also argued that the policy had been exhausted, terminating its duty to defend.

However, in her Aug. 15 ruling, Judge Eileen Bransten held that under New York state law, the duty to defend “extends to the entire action,” citing precedent that “if various grounds are alleged, some within and some without the coverage of the policy,” the insurer has a duty to defend the action on behalf of the insured.


The judge held that the Port Authority's right to recover the entire amount expended by American Home in defending the action can't be diminished because there might be additional insurers that also have a duty to defend.

“The court concludes that American Home's duty to defend extends to the entirety of those WTC asbestos claims asserting claims covered by the policy,” the judge wrote.

Regarding American Home's assertion that the policy had been exhausted, the judge ruled that the duty to defend continues even after the policy's indemnity limits are exhausted unless the policy expressly limits the duty to defend.

“American Home points to no provision of the policy terminating defense costs upon exhaustion of the liability limit,” the judge wrote. “A policy may expressly limit the duty to defend; however, American Home points to no such limitations here.”

In her ruling, the judge also granted the Tishman defendants' motion to dismiss counts against them in the American Home action and denied a motion by Hartford Accident & Indemnity Co., which had issued policies to Mario & DiBono Plastering, to intervene in the case.