Groups Seek to File Brief on Terror Insurance

The Mortgage Bankers Association of America and the Commercial Mortgage Securities Association are seeking to file a friend-of-the-court brief with the New York state Supreme Court in support of CIGNA Investments and others in litigation involving terrorism insurance.The trade associations are asking the court to reconsider a June 3 decision of the Appellate Division in the litigation with Four Times Square Associates. The decision, relating to terrorism insurance on a $430 million commercial mortgage on the Conde Nast Building in Times Square, "invalidates legal remedies permitted under the loan documents," the associations said. The court had ruled that CIGNA, the mortgage lender on the building, could not divert money from the building's accounts to pay for terrorism insurance, since this would damage the goodwill of the owner. The groups argue that the economics of commercial mortgage transactions will be "severely undermined if the decision is allowed to stand" because the loan document provisions in that case were not able to be enforced. The MBA is concerned that the resulting uncertainty could restrain investors from accessing their collateral and potentially "threaten credit availability" to properties in New York. The CMSA says the decision "undermines fundamental arrangements upon which the liquidity and efficiency of the commercial mortgage-backed securities market depend." The groups can be found online at http://www.mbaa.org and http://www.cmbs.org.