The Real Deal New York

Extell, Lend Lease demand One57 crane insurance payout

Builders claim insurers must pay up for $11M in damages
By Katherine Clarke | September 17, 2013 12:52PM

It’s been almost a year since a crane at the construction site of Extell Development’s condominium and hotel development One57 snapped in the winds of Hurricane Sandy, threatening to plummet 1,000 feet to street level. But the developer has still not snagged an insurance payout to cover the costs associated with the incident.

Indeed, Extell and the project’s construction manager Lend Lease are now suing their insurers, a group led by Zurich American Insurance Company, over a payout they say they’re owed under the building’s risk policy.

The Zurich-led group refused Lend Lease’s $4.5 million claim for property damage in March, according to a complaint filed yesterday in New York State Supreme Court, while Extell’s claim for $6.5 million, submitted Aug. 9, has not yet received a response. Both parties plan to make additional claims once the extent of the loss has been determined, according to the complaint.

Spokespersons for Extell, Lend Lease and Zurich declined to comment on the litigation.

The October 2012 crane incident, which became an enduring image of Super Storm Sandy, delayed the delivery of the 74-story luxury condominium at 157 West 57th Street by as much as 60 days, it was previously reported. It sparked lawsuits against Extell from neighbors displaced by the accident.

Zurich holds 50 percent of the policy while other insurers Ace American Insurance Company, XL Insurance America, Travelers Excess and Surplus Lines Company and Axis Surplus Insurance Company hold the remaining 50 percent, the complaint says.

The insurers denied Lend Lease’s claim on the basis that the crane was a temporary structure not destined to become a permanent part of the insured project — and therefore not covered under a 2010 risk policy, according to the suit.

However, Extell and Lend Lease contend that costs associated with the crane collapse should be covered under the policy because they are actually damages stemming from the work of Pinnacle Industries, the crane operator. The insurers valued Extell’s contract with Pinnacle, which provided for the building and removal of the crane structure and expressly identified the crane as being integrated into the structure of the building, at $89 million. The crane collapse, the plaintiffs claim, falls within that $89 million insurance budget.

The insurers valued the project at $700 million altogether, according to the complaint.