Contract Interpretation and the World Trade Center

A Video Explaining the Doctrine of Reasonable Expectations

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The act of infamy at the World Trade Center (WTC) in New York City on September 11, 2001, is responsible for a great deal of insurance litigation concerning, among other things, the meaning of the term “occurrence” in first party property policies and the methodology required of insurers when interpreting a policy of insurance. In the WTC policies, “occurrence” was defined as follows:

“Occurrence” shall mean all losses or damages that are attributable directly or indirectly to one cause or to one series of similar causes. All such losses will be added together and the total amount of such losses will be treated as one occurrence irrespective of the period of time or area over which such losses occur.

Because WTC insurance issues are surrounded by the horrendous facts of the attack, and due to the fact that some policies had yet to be printed and delivered to the insured before September 11, 2001, the decisions rendered in interpreting the policies had far-reaching impact. The rulings in the WTC cases, combined with a decision of the California Supreme Court, are changing how insurance policies are interpreted. Since policy interpretation is essential to the presentation of any insurance claim, the following detailed discussion is important to all those concerned with insurance claims.

“Reasonable expectations” does not mean, however, that the expectations of the insured can change or modify the clear and unambiguous language of the policy of insurance. The Third Circuit found, in Canal Insurance v. Underwriters, against the insured’s claim of reasonable expectations, finding that in the context of the case before it “the refusal to look beyond the plain meaning of the unambiguous exclusionary language to Singh’s reasonable expectations is consistent with the interpretation of Pennsylvania case law in our Circuit.”

For example, a case decided over 200 years ago made the point that the reasonable expectations of the insured include the understanding that “every [insurer] is presumed to be acquainted with the practice of the trade he insures…. If he does not know it, he ought to inform himself.” Similarly, more than 150 years ago the US Supreme Court in Hazard’s Administrator v. New England Marine Insurance Co., 33 U.S. 557 (1834) adopted the rule. It concluded that “no injustice is done if insurers are presumed to know their insureds’ industry because it is part of their ordinary business.”

© 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders.

He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business.

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He is available at and Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award. Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

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