A federal appeals court has upheld a lower court decision that dismissed a subrogation claim by Industrial Risk Insurers against Citigroup stemming from the terror attack on the World Trade Center on Sept. 11, 2001.
The United States Court of Appeals for the Second Circuit in New York agreed with the decision of U.S. District Court Judge Alvin K. Hellerstein in Manhattan to dismiss the insurer's subrogation claim for gross negligence.
Industrial Risk is a subsidiary of GE ERC, which is now part of Swiss Re.
Industrial Risk charged that Citigroup, which was the largest tenant at 7 World Trade Center, was grossly negligent because it built the building with a diesel fuel powered generator. When the World Trade Center buildings were attacked on Sept. 11, the number 7 building next door was also damaged, and the fuel was ignited, causing the building to burn and eventually collapse after seven hours.
Industrial Risk has paid the owner of the property, Silverstein Properties, more than $400 million, according to court documents.
The court agreed with Judge Hellerstein that Citigroup's conduct was not gross negligence.
In 2005, the same court agreed with the decision of Judge Miriam G. Cedarbaum, also from U.S. Southern District of New York, that Citigroup was not entitled to any portion of the Silverstein Properties' insurance recovery from Industrial Risk.
Citigroup was seeking coverage for its expense of $280 million in building improvements it claimed it made. The judge found Citigroup was responsible for securing its own insurance to cover the loss.
A request for comment from Swiss Re representatives was not immediately returned.
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