SR International Business Insurance Co. v. World Trade Center Properties, LLC.

Brief Fact Summary.

SR International Business Insurance Co. sued World Trade Center Properties, LLC claiming that the terrorist attacks on the World Trade Center constituted one occurrence under temporary binder insurance policies.

Synopsis of Rule of Law.

A contracting party’s subjective understanding of a contract provide an objective understanding into the party’s actions.

Facts.

World Trade Center Properties, LLC. (WTC) were negotiating insurance policies with SR International Business Insurance Co. (SR) when the terrorist attacks of September 11th occurred. The insurance companies issued temporary binders during the time the full insurance policies were being negotiated. The temporary binders provided $3.5 billion for each occurrence but did not define what constituted an occurrence. SR sued WTC claiming that the terrorist attacks on the World Trade Center constituted one occurrence under temporary binder insurance policies.

Issue.

Whether a contracting party’s subjective understanding of a contract can provide an objective understanding into the party’s actions?

Held.

Yes. The judgment of the district court is affirmed. The admission of the testimony was not erroneous as the jury was properly instructed that a party’s subjective intent could not change the meaning of statements and acts communicated by another party.

Discussion.

A party’s intentions controls the interpretation of a contract. A party’s objective intent are determined by their expressed words and actions. A party’s uncommunicated subjective intent cannot determine ambiguous terms in a contract.