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HUDSON NEWS COMPANY v. FEDERAL INSURANCE COMPANY

April 4, 2003

HUDSON NEWS COMPANY, PLAINTIFF,
v.
FEDERAL INSURANCE COMPANY, DEFENDANTS.



The opinion of the court was delivered by: William J. Martini, United States District Judge

OPINION

Before the Court is Plaintiff, Hudson News Company's Petition to Remand this matter to the New Jersey Superior Court in Hudson County, pursuant to 28 U.S.C. § 1447, and Defendant, Federal Insurance Company's Cross-Motion for Transfer of Venue to the Southern District of New York pursuant to the Air Transportation Safety and System Stabilization Act, Pub.L. No. 107-42, 115 Stat. 230 (Sept. 22, 2001), amended by the Aviation and Transportation Security Act, Pub.L. No. 107-71, 115 Stat. 597 (Nov. 19, 2001) ("Air Safety Act" or "Act").

For the reasons set forth below, this Court finds that Plaintiff, Hudson News Company's Petition for Remand is GRANTED, and Defendant, Federal Insurance Company's Cross-Motion for Transfer of Venue is DENIED.

FACTUAL BACKGROUND

Plaintiff, Hudson News Company ("Hudson") is engaged in the business of distributing and selling publications and other items as a wholesaler and retailer at various locations throughout New Jersey, New York, and other states within the United States. (Compl. ¶ 1). Defendant, Federal Insurance Company ("Federal") is duly licensed as a property and casualty insurance carrier in the State of New Jersey, and is engaged in the business of selling and issuing insurance policies to the public subject to the laws of the State of New Jersey. (Id. ¶ 2). Hudson has its principal place of business in North Bergen, Hudson County, New Jersey. (Def. Notice of Removal ¶ 3). Federal is an Indiana corporation with its principal place of business in Warren, Somerset County, New Jersey. (Id. ¶ 4).

It is undisputed that Hudson purchased an insurance policy from Federal covering the period from December 31, 2000, to December 31, 2001. (Compl. ¶ 3). In the first quarter of 2001, Hudson became aware of an impending strike at one of their retail locations in Cincinnati, Ohio. (Oberg Aff. ¶ 4). Hudson inquired about coverage for business income losses from their broker, Bruce Gendelman Company, Inc. ("Gendelman") in Milwaukee, Wisconsin, who was also the broker for Federal, in relation to the possible strike. (Id. ¶ 5). Gendelman responded that Hudson was not covered for the strike because none of Hudson's retail locations, including the Cincinnati, Ohio location were "scheduled locations" for purposes of determining business income loss. (Id. ¶ 6-7). Hudson asked Gendelman how it could obtain insurance coverage for business income losses at the relevant locations. (Id. ¶ 8). Gendelman advised that business income worksheets had to be completed for each retail location and submitted to Federal. (Id.) Gendelman sent the worksheets to Hudson, who completed approximately forty-four (44) such business income worksheets and sent them back to Gendelman on March 29, 2001. (Id. ¶ 9). Federal received these worksheets in early April 2001 in Milwaukee, Wisconsin, the location of Federal's underwriter for the Hudson account. (Id. ¶ 10).

Hudson's then existing policy provided for fifteen million dollars ($15,000,000.00) in blanket business income loss coverage at a few "scheduled locations". (Id. ¶ 11). Hudson's obvious intent in filling out the 44 business income worksheets was to add those retail locations to the list of scheduled locations, thereby making them subject to the $15 million blanket business income loss coverage. (Id.) Without the "scheduling" of these locations, Hudson would have been limited to only fifty-thousand dollars ($50,000.00) per location, in coverage for business income losses. (Id. ¶ 12). Hudson contends that they never heard from Federal regarding the worksheets again. (Id.) Several months later, the September 11, 2001 terrorist attacks on New York destroyed the twin World Trade Center towers ("WTC"), resulting in catastrophic loss of lives, and significant economic casualties. Hudson's retail and other business operations suffered profound effects because of the WTC attacks: business personal property at the WTC was damaged by fire as a result of the attacks, and other physical loss and damages were incurred. (Compl. ¶ 3). In addition, the governmental shutdown of air flights caused Hudson to suffer income/earnings loss and extra expenses. (Id.)

Hudson submitted a written claim to Federal for losses totaling $16,653,696.43 (Compl. Ex. A), a substantial majority of which, ($12,865,948.80, as undisputed by Hudson), relates to the destruction of Hudson's retail operations located at the destroyed WTC sites. (Id.) Federal disputed Hudson's claim, stating that certain locations, including Hudson's two retail facilities and a proposed café at the WTC site, were not specified in the policy for business income and extra expense coverage, and thus were subject to a limitation of liability for unnamed locations, in the amount of $50,000.00. (Pl. Pet. For Remand ¶ 3). Also, Federal notified Hudson that the 44 locations were not added on as "scheduled locations" and therefore were not subject to the $15 million dollar blanket coverage. (Oberg Aff. ¶ 14). In all, Federal paid a fraction of Hudson's multi-million dollar insurance claim arising out of the WTC attacks.

Hudson evidently disagreed with Federal's valuation of its claim, and on August 12, 2002, submitted a demand for an appraisal pursuant to a provision in the policy, which detailed an appraisal procedure in event that the parties disagreed on the value of the loss or damage. (Pl. Pet. For Remand ¶ 4). Federal never responded to Hudson's demand for appraisal. (Id.)

PROCEDURAL HISTORY

On August 22, 2002, Hudson filed a four-count Complaint in the Superior Court of New Jersey, Hudson County, seeking: (1) a declaratory judgment, brought pursuant to N.J.S.A. 2A:16-52, to determine the respective rights and responsibilities of the parties under the policy; (2) enforcement of the appraisal clause pursuant to the policy; (3) an award of consequential damages, as determined by the appraisal, because of Federal's allegedly deliberate, bad-faith dealings with Hudson; and (4) punitive damages. (Pl. Compl. ¶ 3-20).

On October 3, 2002, Defendant removed this action from the Superior Court to the United States District Court for the District of New Jersey, premising removal solely upon § 408 of the Air Safety Act. (Def. Notice of Removal ¶ 6). Federal stated that Congress created a federal cause of action "`for damages arising out of the hijacking and subsequent crashes' of the aircrafts and (Congress) provided that `this cause of action shall be the exclusive remedy for damages arising out of the hijacking and subsequent crashes of such flights.'" (Def. Notice of Removal ¶ 7, citing from the Air Safety Act, § 408(b)(1)). Federal also argued that the appropriate venue for this claim was established by the Air Safety Act, which provides, in relevant part that "the United States District Court for the Southern District of New York shall have original and exclusive jurisdiction over all actions brought for any claim (including any claim for loss of property, personal injury, or death) resulting from or relating to the terrorist-related aircraft crashes of September 11, 2001. (Id. ¶ 3, citing from the Air Safety Act, § 408(b)(3)).

Federal alleged that because Hudson's Complaint asserted "claims for damages arising out of the hijacking and subsequent crashes of the aircrafts, including property damage at the World Trade Center", the federal cause of action delineated in the Air Safety Act was Hudson's exclusive remedy, and thus, this case satisfied the federal question requirement pursuant to 28 U.S.C. § 1331 and 1441(b). (Def. Notice of Removal ¶ 8-9). Furthermore, Federal maintained that because the Southern District of New York was the only court vested with jurisdiction over ...


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