Sunday, December 1, 2013

Omni Berkshire Corp. v. Wells Fargo Bank, N.A. case brief

Omni Berkshire Corp. v. Wells Fargo Bank, N.A. case brief summary
307 F.Supp.2d 534 (2004)


CASE SYNOPSIS
Plaintiff hotels asked the court to rule whether its obligation to maintain comprehensive all risk insurance required it to continue to maintain terrorism coverage, even though terrorism insurance was typically excluded from all risk policies; and, assuming no such obligation existed, whether it was reasonable for defendant servicing company to require the hotels to obtain terrorism insurance under the other reasonable insurance clause.

CASE FACTS
The hotels borrowed $ 250 million in 1998 pursuant to an agreement which required the hotels to obtain and maintain comprehensive all risk insurance on the hotels as well as such other reasonable insurance as the lender might request. After September 11, 2001, however, insurance companies began excluding terrorist attacks from their all risk policies. Terrorism insurance was still available at a substantial additional expense. In the instant case, the servicing company requested that the hotels obtain additional terrorism insurance, but the hotels refused, citing the cost. The parties did not define all risk insurance in the agreement at least in part because there was a general understanding in the insurance industry as to the meaning of all risk insurance.

DISCUSSION

  • The court held that if the parties had intended to require the hotels to maintain for the life of the agreement all risk insurance in the form that existed in 1998, i.e., that included terrorism insurance, they surely would have said so. 
  • The court also concluded that the servicing company acted reasonably in requiring the hotels to obtain, as other reasonable insurance, an additional $ 60 million in terrorism coverage.

CONCLUSION
Judgment was entered in favor of the servicing company and the hotels' complaint was dismissed with prejudice.

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