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Over the past several decades, federal and state courts nationwide have heard cases where the implied co-insureds doctrine has been asserted and have come to totally different conclusions. The doctrine holds that an insurer may not bring suit by way of subrogation against a tenant who negligently or willfully causes damages to property insured under an insurance policy procured by a landlord on the ground that the tenant is a co-insured under that policy. Recently, the U.S. District Court for the Southern District of New York considered a case involving the implications of the implied co-insureds doctrine and the events of Sept. 11, 2001.
In Industrial Risk Insurers v. Port Authority of NY & NJ, 387 F.Supp.2d 299 (S.D.N.Y. 2005), the court considered whether aspects of the implied co-insureds doctrine precluded an insurer from filing suit by way of subrogation against a tenant in the 7 World Trade Center building, adjacent to the twin towers, which stored fuel in several fuel tanks located inside the building. The insurer alleged that the tenant's gross negligence in storing the fuel contributed to the inferno that destroyed 7 World Trade Center when flaming debris from the collapsing twin towers ignited the building. The tenant countered that the implied co-insureds doctrine, as adopted by the New York courts, prevented the insurer from maintaining a subrogation suit against the tenant. Ultimately, the court held in favor of the tenant and dismissed the insurer's subrogation claim against the tenant.
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