AIG unit must defend Port Authority in WTC asbestos litigation

A unit of American International Group Inc. must defend the Port Authority of New York and New Jersey and several contractors against scores of asbestos claims brought by construction workers on the original World Trade Center, a panel of New York judges ruled Thursday.

In doing so, the appellate court upheld most of a lower court’s 2017 ruling in American Home Assurance Co. v. The Port Authority of New York and New Jersey et al.

The case involves a dispute over a liability policy issued to the Port Authority and other policyholders in connection with the original World Trade Center, known as the Hudson Tubes Project. Since the 1980s, the Port Authority and others have been the subject of thousands of asbestos-related personal injury claims allegedly arising from the World Trade Center site during its construction.

AIG unit American Home Assurance Co. defended and settled World Trade Center asbestos claims for more than 25 years, according to court records. On Dec. 9, 1975, American Home sent the Port Authority notice of cancellation effective Feb. 7, 1976, according to records.

American Home held that certain claims against some of the policyholders are not covered because the policyholders cannot prove that the claimants’ alleged injuries occurred during the period covered under the policy.

The policyholders contended that the plain language of the American home policy does not require that a personal injury occur during the policy period for coverage to be triggered.

American Home also maintained that claims against some of the defendants’ spray-on asbestos fireproofing came from a single occurrence and the applicable $10 million limit of liability has been exhausted.

Thursday’s ruling by a four-judge panel of Appellate Division of the Supreme Court of New York, First Department upholds the 2017 ruling by New York Supreme Court Judge Eileen Bransten. 

Judge Bransten wrote that “it is clear, that contrary to American Home’s arguments, the plain language of the policy does not require injury during the policy period for coverage to be triggered.”

“Indeed under the plain language of the policy, coverage is triggered if the injury ‘arises out of’ construction of the project, regardless of when the injury itself began,” she stated.

The appellate court agreed.

“The plain language of the subject insurance policy providing for coverage for injuries arising out of the ‘Premises — Operations Hazard’ means that the policy covers injuries that result from operations that occurred during the policy period,” the appellate panel stated. “Plaintiff's interpretation, which would limit coverage to injuries themselves occurring during the policy period, is not supported by that language and also is inconsistent with the broad ‘Insuring Agreement’ that requires plaintiff to pay ‘all sums’ that the insured becomes legally obligated to pay as damages for personal injuries ‘in connection with the construction of [the WTC project].’ The foregoing does not render meaningless or superfluous the coverage that the policy provides for injuries arising out of the ‘Products — Completed Operations Hazard,’ a separate risk.”

The appellate division held that the “Supreme Court correctly concluded that, in the absence of a single event or accident, all claims alleging exposure to asbestos from spray-on fireproofing at the site over a three-year period did not arise from a single occurrence under the policy.”

The appellate court also held that Judge Bransten “incorrectly concluded that plaintiff's duty to defend survives exhaustion of the policy's liability limit. The policy explicitly provides that defense costs are subject to that limit.”

An AIG spokesperson could not be immediately reached for comment.