Court ruling gives developers property loss protection from terrorism

Utility, insurance companies, not able to pursue damages from property destruction from World Trade Center attacks on 9-11

A divided federal appeals court opinion may make it harder to hold building developers and construction firms liable for damages from major acts of terrorism that are impossible to guard against.

The court ruled 2-1 (in the case Aegis Insurance Services Inc. et al v. 7 World Trade Center Co et al, 2nd U.S. Circuit Court of Appeals, No. 11-4403), that utility Consolidated Edison and its insurers could not pursue damages for negligence over the destruction of its electrical substation located under 7 World Trade Center during the Sept. 11, 2001 terrorist attacks. The utility had been suing developer Larry Silverstein and builder Tishman Construction Corp.

Writing for the majority, Circuit Judge Rosemary Pooler said, “We have little trouble concluding that the confluence of these events demonstrates that 7 World Trade Center would have collapsed regardless of any negligence ascribed by plaintiffs’ experts to the design and construction of [the building] more than a decade earlier.

“It is simply incompatible with common sense and experience to hold that defendants were required to design and construct a building that would survive the events of Sept. 11, 2001.”

Pooler also said Con Ed’s theory could have exposed owners and developers to a broad range of damages, including “tort” damages for private harms.

“Under Con Ed’s approach to liability,” said the judge, “those who designed and constructed the building would presumably be liable if, for example, 7 WTC collapsed as a result of a fire triggered by a nuclear attack on lower Manhattan.” The concepts underlying tort law “must engage with reality,” she concluded.