Full opinion text
Judge STRAUB concurs in part and dissents in part in a separate opinion. DEBRA ANN LIVINGSTON, Circuit Judge: This ease concerns the tremendous property damage caused by the terrorist attacks of September 11, 2001. Just months before the attacks, in April 2001, World Trade Center Properties LLC and affiliated companies (‘WTCP”) obtained 99-year leases for 1, 2, 4, and 5 World Trade Center (the “Main Site Buildings”) from the Port Authority of New York and New Jersey (“Port Authority”). A separate corporation, 7 World Trade Company, L.P. (“TWTCo.”), held a long-term lease for 7 World Trade Center, which stood adjacent to the Main Site Buildings. The terrorist attacks destroyed all five of the buildings (collectively, the “Leased Buildings”), leaving WTCP and TWTCo. (“Plaintiffs”) saddled with significant losses. In March 2005, Plaintiffs brought suit in the United States District Court for the Southern District of New York (Heller-stein, J.) against a group of airlines and security contractors (“Defendants”), seeking to recover for these losses. They alleged that, because the Defendants were negligent in overseeing airport security systems, the terrorists were able to hijack American Airlines Flight 11 and United Airlines Flight 175 and to fly those planes into the Twin Towers. After a series of summary judgment decisions and a limited bench trial, Judge Hellerstein, who has presided over these matters with exemplary care and thoughtfulness, entered judgment for Defendants. The court decided that, if Plaintiffs could prove liability, they would be entitled to compensation for the amount of value that their leasehold interests lost due to the attacks, but not for reconstruction costs or other claimed consequential damages related to the cost of retenanting the Leased Buildings, replacing tenant property, hiring attorneys, and paying mortgage carrying costs. The court then found that the value of WTCP’s leasehold interests declined by, at most, $2.805 billion, while the value of 7WTCo’s interests fell by $737 million. Both Plaintiffs, however, received insurance payments for their property damage that exceeded those figures and compensated Plaintiffs for the same economic loss as the potential tort award. Because New York Civil Practice Law and Rules § 4545 (“CPLR”) requires courts to reduce damage awards to reflect corresponding insurance payments, the district court concluded that, even if Plaintiffs could prove liability, they could not receive a damages award, and that judgment for Defendants was therefore appropriate. Separately, the district court dismissed 7WTCo.’s claims against United Airlines, Inc. and its parent company, United Continental Holdings, Inc. (collectively, “United”), on the grounds that the airline had no connection to American Airlines Flight 11, which destroyed 7 World Trade Center. On appeal, we agree with the district court’s conclusion that Plaintiffs are entitled to compensation only for the amount of value that their leasehold interests lost due to the terrorist attacks, that they cannot recover their claimed consequential damages, and that, pursuant to CPLR § 4545, their insurance recoveries correspond to, and offset, their potential tort award. We also agree that United had no duty to supervise the security checkpoints or detect the hijackers who boarded American Airlines Flight 11. However, the district court erred in two respects. First, the court used an incorrect methodology when calculating the value by which Plaintiffs’ leasehold interests declined. Second, it wrongly decided that prejudgment interest accrues at the federal funds rate on the diminution in value of Plaintiffs’ leasehold estates. Instead, the court should have calculated prejudgment interest using New York’s statutory prejudgment interest rate, and assessed that interest based on the final damages award. We therefore vacate in part the district court’s entry of judgment for Defendants — insofar as it miscalculated the diminution in the value of Plaintiffs’ leasehold interest and improperly assessed the prejudgment interest by using the federal funds rate — and remand with instructions as to further proceedings. On remand, the district court should reexamine the diminution in value of Plaintiffs’ leasehold interests in accordance with the guidance provided in this opinion and, if appropriate, calculate interest based on any resulting award (after accounting for the offset of Plaintiffs’ insurance recoveries) using New York’s statutory prejudgment interest rate. BACKGROUND A. Factual Background 1. The World Trade Center Leases In 1962, New York and New Jersey enacted legislation authorizing the Port Authority to construct an “interurban railway” between the two States and a “facility of commerce” to accommodate “the exchange and buying, selling and transportation of commodities and other property in world trade and commerce.” N.Y. Unconsol. Law § 6601(6)-(8); see N.J. Stat. § 32:1-35.50-82:1-35.68. From that legislative command sprung the World Trade Center' complex, which upon completion in 1973 “consisted of a 16-acre public site with a street level plaza, a street level and underground shopping mall, a transportation terminal for the New York-New Jersey PATH trains, a subway hub offering direct access to several [New York City] subway lines, and six [office] buildings, including the ‘Twin Towers’ and the first hotel to open in downtown Manhattan since 1836.” J.A. 548. Five of those buildings — 1, 2, 4, 5, and 7 World Trade Center — provided approximately 12 million square feet of office space. In all, the complex reshaped the City’s skyline and the economy of lower Manhattan. After construction, the Port Authority acted as a landlord for the office space in 1, 2, 4, and 5 World Trade Center, the Main Site Buildings. During that time, it studied the possibility of transferring its role as landlord to a private entity and investigated “comparisons of the World Trade Center with similar private sector operations.” J.A. 377. On January 25, 1996, the Port Authority went further, hiring J.P. Morgan & Co., Cushman & Wake-field, and Douglas Elliman Realty Investors to test the “market reaction” to “three specific options for maximizing the value of the World Trade Center to the Port Authority and to the people of the region”: selling the property, leasing the property, or relinquishing operational control of the property through an asset management agreement. J.A. 377. Those tests convinced the Port Authority to lease portions of the Main Site Buildings to private operators. The Port Authority began the leasing process by sending a worldwide “request for interest” and then asking 30 of the responding companies for preliminary proposals. The requests generated eight submissions, which the Port Authority narrowed to a “short-list” of four finalists: Boston Properties, Inc.; Brookfield Financial Properties; Silverstein Properties, Inc. (later, “WTCP”) and Westfield America, Inc.; and Vornado Realty Trust. J.A. 377. These entities were allowed to perform due diligence before submitting bids. On February 22, 2001, the Port Authority entered into an exclusive negotiating period with Vornado Realty Trust for a 99-year lease on all of the Main Site Buildings. “The value to the Port Authority of Vornado Realty Trust’s proposed net lease transaction, on a present value basis,” was estimated by the Port Authority to be approximately $3.253 billion. J.A. 377. When the negotiations fell apart, the Port Authority turned to the second-highest bidder, WTCP. The parties signed an “Agreement to Enter Lease” on April 26, 2001 and, on July 16, 2001, WTCP signed 99-year leases for the Main Site Buildings. Under the terms of those leases, WTCP obtained the right to manage and sublease approximately ten million square feet of office space, much of which was already occupied by tenants. In exchange, it agreed to make an upfront payment of $491.3 million and to pay three forms of rent: basic rent, which increases gradually over the 99-year lease term; additional, fixed rent for the first 30 years of the lease; and a percentage of WTCP’s gross revenue from operating the premises. It also undertook non-rent obligations, the most significant of which was the promise that, in the event that the Main Site Buildings were destroyed or damaged, WTCP would “rebuild, restore, repair and replace [them] ... to the extent feasible, prudent and commercially reasonable.” J.A. 461. In addition, it promised to pay for maintenance, operational costs, and tax equivalents, and to purchase sizable insurance policies. WTCP announced the acquisition in a brochure to investors, identifying the present value of the overall “purchase price” to be $2.844 billion. J.A. 524. Unlike the Main Site Buildings, 7 World Trade Center was privately managed and operated even before its construction. In 1980, the Port Authority hired 7WTCo. to design, erect, and equip an office building adjacent to the Main Site of the World Trade Center complex. 7WTCo. completed the project, which came to be known as 7 World Trade Center, in 1987, at which point it signed a 99-year lease with the Port Authority to manage the property. Like WTCP, TWTCo. agreed to pay rent, tax equivalents, and operational expenses, to purchase insurance, and to “rebuild, restore, repair and replace” the building “at its sole cost and expense” in the event of its destruction. J.A. 943-49. 2. The Destruction of the Leased Buildings On the morning of September 11, 2001, Mohamed Atta, “[t]he operational leader of the 9/11 conspiracy,” J.A. 373, and an accomplice passed through airport security in Portland, Maine, and took U.S. Airways/Colgan Flight 5930 to Boston Logan International Airport. J.A. 359. Upon arriving at Logan, they joined three co-conspirators and passed through a security checkpoint run by American Airlines before boarding American Airlines Flight 11. Five other terrorists began their attack in Boston, entering the boarding area through a United Airlines security checkpoint at Logan Airport and then boarding United Airlines Flight 175. The first group hijacked Flight 11 and crashed the plane into 1 World Trade Center. Soon after, the second group used Flight 175 to destroy 2 World Trade Center. By the late afternoon, falling debris and fires had destroyed the other Main Site Buildings and 7 World Trade Center, and had damaged large portions of lower Manhattan. The September 11th attacks were a financial catastrophe for Plaintiffs. According to WTCP and TWTCo., their leases required them to continue paying rent to the Port Authority notwithstanding the lack of income from tenants, and to reconstruct the Leased Buildings. Plaintiffs also claim that the attacks forced them to bear additional expenses, including the cost of pursuing insurance claims, replacing tenant improvements, retenanting the buildings, and paying mortgage carrying costs. To guard against these types of losses, WTCP and 7WTCo. had obtained extensive insurance policies on their leasehold interests, which insured them for damage caused by terrorist attacks. WTCP’s policy involved over two dozen insurers and insured the company “for business interruption (lost [rental payments]) and the replacement costs of the buildings if damaged or destroyed, up to $3.5468 billion per [covered] occurrence.” S.P.A. 79. TWTCo. obtained a similar, but smaller, policy from Industrial Risk Insurers (“IRI”), which covered business interruption losses and rebuilding costs up to $860 million per covered occurrence. S.P.A. 79. The replacement cost coverage was designed to protect Plaintiffs against physical damage to their property — and did not require that they actually repair or rebuild the Leased Buildings in order to receive insurance payments — while the business interruption coverage was intended to indemnify Plaintiffs for any loss of income that occurred while the leased buildings were damaged or destroyed. Both Plaintiffs filed insurance claims shortly after the September 11th attacks. WTCP submitted proofs of loss seeking $8,531 billion from its insurers. These proofs of loss allocated roughly $7,183 billion to replacement costs for the Main Site Buildings and $1,348 billion to business interruption losses. WTCP also identified damages “other than' destruction of real property and business interruption,” but never quantified those claims. J.A. 1010. While three insurers paid their portion of the claims promptly, the rest argued that the September 11th attacks were one “occurrence” under their policies, so WTCP’s recovery could not exceed $3.5468 billion. WTCP sued the recalcitrant insurers in the United States District Court for the Southern District of New York, see SR Int’l Bus. Ins. Co. v. World Trade Ctr. Props., LLC, 467 F.3d 107 (2d Cir.2006), and the parties ultimately settled, with the insurers agreeing to pay WTCP approximately $4.1 billion. The settlement involved a general release of all of WTCP’s claims against the insurers and did not allocate the settlement proceeds among WTCP’s claimed losses. Separately, 7WTCo. submitted proofs of loss seeking $1.497 billion from IRI, with roughly $1.053 billion allocated to replacement costs, $442 million for business interruption, and $2 million for personal property. Like WTCP’s claims, TWTCo.’s submission exceeded its $860 million per-occurrence policy limit, and IRI initially balked at paying the entire claim. 7WTCo. filed suit, and IRI eventually agreed to pay approximately $831 million in exchange for a general release of all claims. Once again, the settlement did not allocate the proceeds of the payment between 7WTCo.’s claimed losses. B. Procedural History In 2004, Plaintiffs sued a group of airlines and airport security contractors in the district court, claiming that their negligent maintenance of airport security checkpoints in Boston and Portland allowed the terrorists to board and hijack the planes that destroyed the Leased Buildings. Plaintiffs’ claims arise under the Air Transportation Safety and System Stabilization Act of 2001 (“ATSSSA”), Pub.L. No. 107-42, 115 Stat. 230 (codified as amended at 49 U.S.C. § 40101), which creates an exclusive “Federal cause of action for damages arising out of the hijacking and subsequent crashes of American Airlines flights 11 and 77, and United Airlines flights 93 and 185, on September 11, 2001.” ATSSSA § 408(b)(1). Under the Act, “[t]he substantive law for decision in any such suit shall be derived from the law, including choice of law principles, of the State in which the crash occurred unless such law is inconsistent with or preempted by Federal law.” Id. § 408(b)(2). The parties agree that, in this ease, the substantive law is derived from the law of New York. Appellants’ Br. at 41; Appellees’ Br. at 82. After extensive discovery, Defendants moved for summary judgment on WTCP’s claims. They focused on damages, rather than the merits of the negligence claim, arguing that: (1) WTCP is entitled to compensation for the amount of value that their leasehold interests lost due to the attacks, and not for replacement costs or other consequential damages; (2) the diminution in the fair market value of the Main Site Leases was $2.805 billion — the present value of the rent that WTCP agreed to pay for those leases; and (3) that, pursuant to CPLR § 4545, any tort award WTCP could receive must be reduced by the amount of its insurance recovery. WUICP countered that using the lost market value of its leasehold interests to calculate damages results in insufficient compensation, that the decline in the value of its leaseholds exceeded $2.805 billion, and that CPLR § 4545 does not require an offset for its insurance recoveries. In support, it offered declarations from expert witnesses. Sheldon Gottlieb, an expert in real estate appraisal, testified that the market value of WTCP’s leaseholds does not reflect the immense public benefits that the World Trade Center complex provided. He added that, in any event, $2.805 billion is simply the amount of rent that WTCP agreed to pay, which is not equivalent to the decline in the value of the WTCP’s leasehold interests because it ignores the profits WTCP expected to earn, the value of non-rent obligations that WTCP assumed, and the post-attack costs that WTCP was forced to bear, which resulted in the leases having a negative value after September 11, 2001. Professor Kerry D. Vandell, an expert in real estate finance, echoed Gottlieb’s opinion that $2,805 billion is the amount of rent that WTCP agreed to pay, not the amount by which the value of its leasehold interest declined. Vandell explained that ascertaining the correct change in value requires comparing the value of WTCP’s leasehold interests before and after the attacks. On December 11, 2008, the district court granted Defendants’ motion in part and denied it in part. The court noted that New York follows the “lesser of two” rule, under which “a plaintiff whose property has been injured may recover the lesser of the diminution of the property’s market value or its replacement cost.” S.P.A. 10. It then concluded that the diminution in market value is the appropriate measure of compensation, rejecting the arguments that, because of the public purpose of the Main Site Buildings and WTCP’s contractual obligation to rebuild, replacement costs are the proper measure of damages. The court, however, refused to conclude that the value of WTCP’s leasehold interest declined by $2,805 billion. Although WTCP agreed to pay that sum to obtain the leases in April 2001, “market values can fluctuate rapidly” and “the value of property privately owned and managed by an experienced real estate developer may enjoy a different market value than property owned and managed by a governmental bureaucracy.” S.P.A. 21. As a result, the court temporarily denied summary judgment to provide WTCP an opportunity to show that the value of the Main Site Leases changed between April and September 2001. The court also concluded that there was insufficient evidence to decide the CPLR § 4545 issue, and therefore denied summary judgment without prejudice. In response to the summary judgment decision, WTCP submitted an additional declaration from Professor Vandell. In this declaration, Vandell reiterated that the diminution in the value of WTCP’s leasehold should be calculated by measuring the “difference between the fair market value of [its] interests immediately before and immediately after” September 11, 2001. J.A. 632. Fair market value is the amount “an investor or third party would be willing to pay for an assignment of’ the Main Site Leases, and can be calculated by comparing the present value of the expected revenues and expenses associated with owning those leases. Id. Because expected costs can equal or exceed expected revenues, the value of a leasehold interest can be zero or negative. Vandell then evaluated the diminution in market value of WTCP’s leasehold interest, concluding that the leasehold had a market value of $1,459 billion immediately before the attacks and negative $5,333 billion immediately afterwards. His calculations included WTCP’s expected profits from operating the Main Site Buildings and the costs associated with reconstruction. In all, the diminution in market value added up to $6,792 billion. The district court considered these arguments and, on April 30, 2009, rejected them. The court characterized WTCP’s submission as an attempt to correct perceived errors in the original summary judgment decision and viewed the argument that the Main Site Leases had negative value after the attacks as a new attempt to recover reconstruction costs. It therefore decided that any recovery by WTCP against Defendants for the Main Site Leases “shall not exceed $2,805 billion.” S.P.A. 30. Several months later, on September 30, 2009, the district court also granted Defendants summary judgment on WTCP’s claims for the cost of retenanting the Main Site Buildings, replacing tenant improvements, and paying attorneys’ fees during the insurance litigation, thereby capping WTCP’s possible damages at $2.805 billion. The 7WTCo. litigation followed a similar path. First, United moved for summary judgment on the grounds that it was not responsible for the security checkpoints that the terrorists used before hijacking American Airlines Flight 11, which destroyed 7WTCo. The remaining Defendants then filed a separate summary judgment motion, arguing that 7WTCo. can recover only the diminution in value of its leasehold interest and that, pursuant to CPLR § 4545, its damages award must be reduced by the amount of its insurance recovery. On November 21, 2012, the district court granted summary judgment to United, concluding that there was no evidence that it had a “connection to Flight 11 or its hijackers,” S.P.A. 56, and therefore that it “did not owe 7WTCo. a duty of care,” S.P.A. 58. The court resolved the second summary judgment motion in an order issued on December 5, 2012. As in WTCP’s case, the district court concluded that 7WTCo. is entitled to compensation for the amount of value that their leasehold interests lost due to the attacks, but not for reconstruction costs or other claimed consequential damages. For 7WTCo., that diminution in value was, at most, $737 million, a figure that the district court drew from Vandell’s assessment of the pre-attack value of 7WTCo.’s leasehold interest. Also as in WTCP’s case, the district court rejected 7WTCo.’s claims to recover for the cost of retenanting the building, lost tenant improvements, attorneys’ fees incurred during litigation with IRI, and mortgage carrying costs. Finally, the district court denied summary judgment to the Defendants on the argument that 7WTCo.’s potential tort award must be reduced by its insurance recovery. After establishing WTCP’s ánd 7WTCo.’s maximum recoverable damages, the district court chose to conduct a bench trial to determine whether, under CPLR § 4545, any tort award Plaintiffs receive' would need to be reduced by the value of their insurance recoveries. Over the course of a five-day trial held in July 2013, the district court heard testimony about the proper way to allocate the insurance recoveries between the different types of insurance claims Plaintiffs submitted, and heard the opinions of two economists— Professor Steven Shavell for the Plaintiffs and Professor Daniel Fischel for the Defendants — about whether a potential tort award would compensate Plaintiffs for the same type of losses that their insurance recoveries remedied. In an order issued from the bench and then supplemented by a written opinion, the district court ruled for the Defendants. It concluded that, after accounting for fees and insurance premiums, WTCP recovered $4.044 billion from its insurers and 7WTCo. recovered $829 million. These payments compensated Plaintiffs for the cost of replacing the leased buildings and “for business interruption, i.e., the cost of rental payments that sub-lessees ... failed to pay ... as a result of the buildings’ destruction.” S.P.A. 81. The court then determined that these categories of insurance recovery “correspond[ ] completely to Plaintiffs’ potential tort recoveries related to the lost value of their leaseholds, and that the insurance recoveries should be set off against such potential tort recoveries, reducing them to zero.” S.P.A. 86. Accordingly, the district court entered judgment for Defendants. DISCUSSION On appeal, Plaintiffs contend that the district court erred at each step in the series of orders that culminated in its decision to dismiss their claims. We review the district court’s grants of summary judgment and its legal conclusions de novo, construing all facts in favor of the nonmov-ing party. Shakhnes v. Berlin, 689 F.3d 244, 250 (2d Cir.2012). As for the bench trial, we review the district court’s findings of facts for clear error, and its conclusions of law de novo. CARCO GROUP, Inc. v. Maconachy, 718 F.3d 72, 79 (2d.Cir.2013) (per curiam). A. Damages Our analysis begins with the calculation of Plaintiffs’ maximum recoverable damages. After a series of summary judgment decisions, the district court determined that, if WTCP and 7WTCo. could prove that Defendants are liable for the destruction of the World Trade Center Complex, the companies could recover, at most, $2,805 'billion and $737 million, respectively. In arriving at this decision, the district court concluded that Plaintiffs are entitled only to the amount of value that their leasehold interests lost due to the attacks, not reconstruction costs, and that Plaintiffs cannot recover for the costs associated with retenanting the Leased Buildings, lost tenant improvements, paying mortgage carrying costs, or hiring attorneys for the litigation against the insurers. We agree with these conclusions, and therefore affirm in substantial part the orders in which the district court announced them. The district court, however, relied on an incorrect method of measuring the market value of leasehold estates. Accordingly, we vacate the portions of the August 30, 2009 and December 5, 2012 orders establishing the diminution in value of Plaintiffs’ leasehold interests, and remand to the district court to reassess these calculations in light of the guidance in this opinion. 1. Reconstruction Costs Under New York law, which provides the substantive law governing Plaintiffs’ ATSSSA claims, “an award of damages to a person injured by the negligence of another” is designed “to restore the injured party, to the extent possible, to the position that would have been occupied had the wrong not occurred.” McDougald v. Garber, 73 N.Y.2d 246, 253-54, 538 N.Y.S.2d 937, 536 N.E.2d 372 (1989). When negligence results in the permanent destruction of real property, damages can “place the wronged victim in the same position as it was prior to the wrongdoing,” 36 N.Y. Jur.2d Damages § 6, in one of two ways. One possibility is to award the plaintiff “the difference between the value of the land before the injury and its value after the injury ... sometimes called the ‘diminution-in-value rule.’ ” 36 N.Y. Jur.2d Damages § 75; see also Fisher v. Qualico Contracting Corp., 98 N.Y.2d 534, 539, 749 N.Y.S.2d 467, 779 N.E.2d 178 (2002). The other is to award “the cost of restoration,” Scribner v. Summers, 138 F.3d 471, 472 (2d Cir.1998) (per curiam), plus the “reasonable worth” of the property’s use while the plaintiff “is deprived of’ the property, 36 N.Y. Jur.2d Damages § 113. While these two measures of damages— the decline in market value and the cost of restoration — compensate a plaintiff for the same injury, they can produce awards of different sizes. As a result, the New York Court of Appeals has instructed that, in general, “the proper measure of damages for permanent injury to real property is the lesser of the decline in market value and the cost of restoration.” Jenkins v. Etlinger, 55 N.Y.2d 35, 39, 447 N.Y.S.2d 696, 432 N.E.2d 589 (1982); see also Hartshorn v. Chaddock, 135 N.Y. 116, 122, 31 N.E. 997 (1892). This “lesser of two” principle reflects the judgment that, in most cases, both measures of damages are capable of “affording full compensation” for lost property — as the Court of Appeals put it, they are “two sides of the same coin.” Fisher, 98 N.Y.2d at 540, 749 N.Y.S.2d 467, 779 N.E.2d 178. Quite simply, when property is damaged, the value of owning that property falls. The value can be returned to the owner by paying an amount of money equivalent to the loss in value or by providing funds to restore .the property to its original state. Id.; see also Dobbs, Law of Remedies § 5.2(3) at 722 (2d ed. 1993) (“The reason for using diminished value as a ceiling on repair costs is clear; diminished value represents the full amount of economic loss of a landowner... .”). Allowing the plaintiff to recover the higher measure of damages, then, would force the defendant to bear a greater cost than is necessary to rectify the harm it caused. In its December 11, 2008 and December 5, 2012 orders, the district court concluded that this “lesser of two” principle limits Plaintiffs’ recoverable damages to the diminution in market value of their leasehold interests and prevents them from recovering reconstruction costs. We agree. New York courts have applied the “lesser of two” principle across a broad spectrum of possessory interests, including fee simple interests in both residential and commercial property. See, e.g., Fisher, 98 N.Y.2d at 536, 749 NY.S.2d 467, 779 N.E.2d 178 (residential property); Hartshorn, 135 N.Y. at 122, 31 N.E. 997 (farm); Prashant Enters. Inc. v. New York, 228 A.D.2d 144, 650 N.Y.S.2d 473, 476 (3d Dep’t 1996) (motel); see also Scribner, 138 F.3d at 472 (family business and rental property). The compensatory principles that animate these decisions apply no differently in the context of leasehold interests like those of the Plaintiffs in the Leased Buildings. A commercial lease entitles the lessee to use all or part of a property for a specified period of time, in exchange for rent and other consideration. This interest is distinct from the original fee simple interest and the lessor’s leased fee estate, and has its own market value— namely, the amount that a buyer would be willing to pay for the right to assume the lessee’s rights and obligations. See Great Atl. & Pac. Tea Co. v. New York, 22 N.Y.2d 75, 84, 291 NY.S.2d 299, 238 N.E.2d 705 (1968); Appraisal Inst., The Appraisal of Real Estate 83 (12th ed.2001). If a portion of the property covered by the leasehold interest is destroyed or damaged, the value of the leasehold interest falls because the bundle of rights to which the owner of that interest is entitled becomes less valuable. See, e.g., James R. MacCrate, The Valuation of Leasehold, Interests, Real Estate Appraisal and Valuation Issues (June 2, 2010), https://realestat evaluation.wordpress.com/2010/06/02/the-valuation-of-leasehold-interests/; Jeffrey D. Fisher & Robert S. Martin, Income Property Appraisal 189 (1991). An award can therefore place the lessee in the “same position as it was prior to the wrongdoing,” 36 N.Y. Jur.2d Damages § 6, either by providing the monetary equivalent of the lost value or by presenting the plaintiff with sufficient funds to repair the damages and weather the reconstruction period, thereby restoring the original value of the rights under the lease. Cf. Great Atl. & Pac. Tea Co., 22 N.Y.2d at 84, 291 N.Y.S.2d 299, 238 N.E.2d 705 (“The damages to which a lessee is entitled are generally the value of the leasehold.”). Of course, leasehold interests involve a different set of rights and obligations than fee simple ownership. But these are differences of degree, not of kind. For instance, a lessee, unlike a fee simple owner, often has an obligation to pay rent that continues even after the property covered by the lease is destroyed. In fact, both WTCP and 7WTCo.’s leases contain such a covenant. This continuing obligation, however, means only that the value of the leasehold interest after the destructive event must take into account the lessee’s obligation to make future rental payments. Professor Vandell, Plaintiffs’ expert on damages, agrees, and attributes a negative market value to Plaintiffs’ leases after the attacks to account for the obligation to pay rent. This method of calculating diminution in market value differs from the calculation that a court would perform in the context of fee simple ownership, but that does not alter the principle that diminution in value, properly ascertained, can adequately compensate a commercial lessee. WTCP and 7WTCo. counter that their leases also differ from fee simple ownership because they are obligated to reconstruct the Leased Buildings. That obligation does not, however, entitle them to the reconstruction cost measure of damages. Although property owners are often “not legally obligated” to reconstruct damaged property, “economic circumstances often force them to do so”; “[w]hen a home is condemned, for example, its owner must find another place to live.” United States v. 50 Acres of Land, 469 U.S. 24, 34, 105 S.Ct. 451, 83 L.Ed.2d 376 (1984). Nonetheless, New York courts have not considered a plaintiffs decision to repair property, standing alone, to be a sufficient justification for awarding replacement costs that exceed diminution in market value. See, e.g., Fisher, 98 N.Y.2d at 534-40, 749 N.Y.S.2d 467, 779 N.E.2d 178 (limiting plaintiffs’ recovery to diminution in market value notwithstanding fact that plaintiff had already rebuilt property); cf. Application of City of N.Y., 250 A.D.2d 304, 680 N.Y.S.2d 533, 535-36 (1st Dep’t 1998) (noting that, in the takings context, replacing condemned property is not sufficient to justify compensation in excess of market value). Compensatory damages, after all, “serve to make good, so far as it is possible to do so in dollars and cents, the harm done by a wrongdoer,” which is, at most, what the plaintiff lost, not what the plaintiff later purchased, even if they were required to do so. Lopez v. Adams, 69 A.D.3d 1162, 895 N.Y.S.2d 532, 538 (3d Dep’t 2010); see Dobbs, supra § 5.2(3) at 722. Replacing a property may cost more than the pre-destruction value, “but the new [property] itself will be more'valuable and last longer.” 50 Acres of Land, 469 U.S. at 34 n. 21, 105 S.Ct. 451 (quoting United States v. 564,54 Acres of Land, 441 U.S. 506, 518, 99 S.Ct. 1854, 60 L.Ed.2d 435 (1979) (White, /., concurring)). Plaintiffs’ covenants to rebuild the Leased Buildings, then, may require them to devote funds to reconstruction, but do not alter the measure of their potential tort recoveries. Just as a landowner may have a strong economic interest in rebuilding property, a lessor and lessee may wish to ensure that the leased property is rebuilt in the event of destruction. Covenants to repair accomplish that goal by allocating the risk of loss between the two parties. They do not, however, magnify the value of the damage from the property destruction or put the party who has assumed the obligation to rebuild in any worse position than a landowner who, for economic reasons, is forced to rebuild in the absence of a contract. As a result, WTCP and 7WTCo., and similarly situated lessees, should not receive a higher measure of damages than the landowner could have recovered without the contract simply because dividing the interest in land required agreeing, in advance, on how to handle possible damage to the property. Cf. 50 Acres of Land, 469 U.S. at 34-35, 105 S.Ct. 451 (concluding that, in the context of just compensation, a plaintiffs “legal obligation” to replace a condemned facility does not justify a different measure of damages than a party without such an obligation would receive). To hold otherwise would be inconsistent with New York courts’ reluctance to consider landowners’ decisions to rebuild when selecting the measure of damages, see Fisher, 98 N.Y.2d at 534-40, 749 N.Y.S.2d 467, 779 N.E.2d 178, and the general principle that, when property is destroyed or condemned, a lessee is entitled to no more for that loss than the unencumbered value of the fee interest, see Great Atl. & Pac. Tea Co., 22 N.Y.2d at 84, 291 N.Y.S.2d 299, 238 N.E.2d 705. As an alternative, WTCP and TWTCo. argue that, in this particular case, diminution of value is an inadequate measure of damages because it does not account for the property’s “unique public benefit” — namely, the promotion of economic development in lower Manhattan and northern New Jersey — or its “iconic status.” Appellants’ Br. at 61-65. In support, they rely on the testimony of their expert witnesses, and contend that a jury should have considered their entitlement to replacement costs. Cf. Jenkins, 55 N.Y.2d at 39, 447 N.Y.S.2d 696, 432 N.E.2d 589 (requiring defendant to prove that the lesser measure of damages “will sufficiently compensate for the loss”). We find these arguments unpersuasive. We recognize that, in the context of just compensation for takings, New York courts have noted that, although ordinarily “the fair equivalent of the actual loss sustained” by a property’s owner is the property’s market value, some property “is of a kind seldom traded, [such that] it lacks a ‘market price’ ” and therefore must be compensated for according to its replacement cost. Matter of Rochester Urban Renewal Agency, 45 N.Y.2d 1, 8-9, 407 N.Y.S.2d 641, 379 N.E.2d 169 (1978). But this class of “specialty” property is narrow; “reproduction cost should be utilized only in those limited instances in which no other method of valuation will yield a legally and economically realistic value for the property.” Great Atl. & Pac. Tea Co. v. Kiernan, 42 N.Y.2d 236, 242, 397 N.Y.S.2d 718, 366 N.E.2d 808 (1977). Accordingly, New York courts have awarded replacement costs only when the property at issue is “specially built” for a “specific purpose” and a “special use,” there is “no market for the type of property ... and no sales of property for such use,” and the property’s use is “economically feasible and reasonably expected to be replaced.” Application of City of N.Y., 680 N.Y.S.2d at 535-36 (quoting Matter of Cnty. of Nassau, 43 A.D.2d 45, 349 N.Y.S.2d 422, 427 (2d Dep’t 1973)); see Matter of Saratoga Harness Racing v. Williams, 91 N.Y.2d 639, 645-46, 674 N.Y.S.2d 263, 697 N.E.2d 164 (1998). “Churches, hospitals, clubhouses and like structures ... commonly fall within this category” because the building “may be regarded by the organization that owns and utilizes it as worth everything it cost to construct and more, yet it may not be ‘marketable’ because no similar group would have sufficient need for the property to be willing to purchase it.” Rochester Urban Renewal Agency, 45 N.Y.2d at 9, 407 N.Y.S.2d 641, 379 N.E.2d 169. In light of this standard, there is no genuine dispute of material fact about whether diminution in market value is an adequate measure of damages. At the start, 7WTCo. has presented no evidence that 7 World Trade Center is sufficiently unique, or served such a significant public purpose, to warrant a recovery in excess of lost market value. In fact, Professor Kerry Vandell, the only expert to submit a report about the property, calculated the change in market value to 7WTCo.’s leasehold interest by comparing the expected income streams before and after the September 11th attacks. As for WTCP, Defendants’ submissions conclusively establish that the company’s interest in the Main Site Buildings was not “specialty” property for which reproduction cost is the only appropriate measure of damages. WTCP’s property interest consists of 99-year leases to five commercial office buildings, with the reversionary interest held by the Port Authority. Far from there being “no market for [this] type of property,” Saratoga Harness Racing, 91 N.Y.2d at 645, 674 N.Y.S.2d 263, 697 N.E.2d 164, WTCP procured its leasehold interests through what Charles Gar-gano from the Port Authority called a “worldwide ... competitive bidding process,” J.A. 594. Michael Levy, from WTCP, agreed that the bidding was “extensive” and “competitive” because the buildings were “trophy” properties. J.A. 598-99. After obtaining the leases, moreover, WTCP operated its Leased Buildings as a landlord, subleasing portions of the property to commercial tenants. This was not a “special use.’’ Application of City of N.Y., 680 N.Y.S.2d at 535-36; see also Heidorf v. Town of Northumberland, 985 F.Supp. 250, 262 n. 6 (N.D.N.Y.1997) (distinguishing between a building’s historic “status” and the uniqueness of the “use” to which it is put). Quite to the contrary, WTCP’s leases required the company to “operate and maintain” the properties as “office building[s] ... in a manner generally consistent with other office buildings located within the Borough of Manhattan,” and included a list of comparable buildings in the area. J.A. 414. Nor is WTCP’s claim for replacement costs supported by the World Trade Center Complex’s public purpose. WTCP’s experts attest to the “public purpose” that the World Trade Center Complex serves, noting that it reinvigorated the economic life of lower Manhattan and Northern New Jersey. But WTCP did not lease the entire World Trade Center Complex; its leasehold interest encompassed only the office space in the Main Site Buildings. As Sheldon Gottlieb, WTCP’s appraisal expert, explained: “[t]he Port Authority never leased the non-commercial, public purpose, and public benefit part of the properties or their operation to WTCP.” J.A. 565 n.4. More fundamentally, in evaluating just compensation, the Supreme Court has refused to compensate private plaintiffs for the community value of their properties. See 564,54 Acres of Land, 441 U.S. at 516, 99 S.Ct. 1854. The Court’s rationale.readily applies in the context of tort damages. “The community benefit” a property confers “might provide an indication of the public’s loss,” but compensatory damages seek to ensure that the “owner” of the property is “made whole.” Id. WTCP “did not hold” its leasehold interests “as the public’s trustee and thus is not entitled to be indemnified for the public’s loss.” Id.; see N.Y. Unconsol. Law § 6610 (entrusting the Port Authority with “undertaking ... [t]he effectuation of the world trade center”). Critically, our conclusion that WTCP and 7WTCo. are not entitled to replacement costs by no means minimizes the importance of the World Trade Center Complex to New York and New Jersey or the country’s interest in seeing the site rebuilt. Compensatory damages are not designed, and courts adjudicating civil claims are not well suited, to heal a region’s and a nation’s wounds. Rather, we simply conclude, agreeing with the district court, that Plaintiffs’ leases for the office space at 1, 2, 4, 5, and 7 World Trade Center can be valued according to market metrics, and that Plaintiffs can therefore be compensated by the diminution in the market value of those leasehold interests. Plaintiffs (assuming liability is established) are entitled to compensation for the amount of value that their leasehold interests lost due to the attacks, but not to reconstruction costs. 2. Consequential Damages In addition to- reconstruction costs, WTCP and 7WTCo. also seek consequential damages. Specifically, Plaintiffs argue that they are entitled to recover for the cost of retenanting the Leased Buildings, hiring attorneys during litigation with their insurers, paying mortgage carrying costs, and losing tenant improvements. The district court denied these claims for consequential damages in orders issued on September 30, 2009 and December 5, 2012. We agree, and address each decision in turn. The decision to deny damages for reten-anting costs and lost tenant improvements flows naturally from the conclusion that diminution in market value, rather than replacement cost, is the correct measure of damages. Before the terrorist attacks, the Leased Buildings were fully tenanted. The difference in value of Plaintiffs’ leasehold interest before and after September 11, 2001, then, includes the loss of those tenants and any improvements they made to the premises. Put differently, the diminution-in-value measure of damages already compensates Plaintiffs for the fact that they lost tenanted buildings complete with tenant improvements. Viewed in this light, Plaintiffs’ claims for the cost of re-tenanting the Leased Buildings and replacing tenant improvements are nothing more than attempts to recover the cost of restoring the Leased Buildings to the state in which they existed before the attack— the “reconstruction cost” measure of damages for these elements of the leasehold interests. Awarding these costs would therefore compensate Plaintiffs a second time for the same loss. See Fisher, 98 N.Y.2d at 540, 749 N.Y.S.2d 467, 779 N.E.2d 178 (noting that “replacement cost and diminution in market value are simply two sides of the same coin”). Such a double recovery would be “wholly inappropriate” under compensatory damages principles. Dobbs, supra, § 5.12(2) at 832 (“It would not be appropriate to award both replacement costs and diminished value of the land, since each of these measures of damage is an attempt to compensate for the same loss.... ”). The other consequential damages claims — for mortgage carrying costs and attorneys’ fees — fail on causation grounds. Regarding the former, WTCP and 7WTCo. undertook the obligation to pay mortgage carrying costs before the September 11th attacks; Defendants’ alleged negligence neither caused Plaintiffs to bear those expenses, nor increased the price. See 103 N.Y. Jur.2d Torts § 10. As to the latter, New York courts allow plaintiffs to recover “the reasonable value of attorneys’ fees and other expenses” when, “through the wrongful act of his present adversary, [the plaintiff was] involved in earlier litigation with a third person in bringing or defending an action to protect his interests.” Coopers & Lybrand v. Levitt, 52 A.D.2d 493, 384 N.Y.S.2d 804, 807 (1st Dep’t 1976). “Such expenses,” however, must be “the natural and necessary consequences of the defendant’s acts,” id., such as when an attorney’s malpractice exposes the client to liability, see Cent. Trust Co. v. Goldman, 70 A.D.2d 767, 417 N.Y.S.2d 359 (4th Dep’t 1979). Defendants’ alleged negligence lacks this requisite connection. Even assuming, arguendo, that Defendants could have reasonably foreseen that their failure to adequately monitor airport security checkpoints could lead to a hijacking and that the hijackers would use the planes to destroy buildings, Plaintiffs’ attorneys’ fees would still not have been the natural and necessary consequence of Defendants’ negligence. That causal chain requires three further steps: first, Plaintiffs filing insurance claims; second, the insurers refusing to pay; and third, Plaintiffs filing suit. This series of events is too attenuated to support a claim for attorneys’ fees. See Martinez v. Lazaroff, 48 N.Y.2d 819, 820, 424 N.Y.S.2d 126, 399 N.E.2d 1148 (1979) (concluding, as a matter of law, that defendant was not a “proximate or legal cause of the injuries suffered” because the “causal connection ... was attenuated”); see also Apollo Steel Corp. v. Melco Cranes, Inc., 202 A.D.2d 1049, 609 N.Y.S.2d 121 (4th Dep’t 1994). The district court was therefore correct to deny Plaintiffs’ claims for consequential damages and to limit their recovery to the diminution in value of their leasehold interests. 3. Calculation of Diminution in Market Value Having concluded that Plaintiffs’ compensable damages are limited to the diminution in the market value of their leasehold interests, we turn now to the issue of calculating that change in value. In summary judgment decisions issued on August 30, 2009 and December 5, 2012, the district court decided that the diminution in the value of WTCP and 7WTCo.’s leasehold interests was, at most, $2.805 billion and $737 million, respectively. The first figure derives from the present value of the rental payments that WTCP promised to make over the 99-year lifetime of its leases, and the second is culled from Professor Vandell’s evaluation of the pre-at-tack value of 7WTCo.’s leasehold interest. We conclude that this process for calculating damages misapprehends valuation in the context of leasehold interests. Accordingly, we remand so that the district court can reassess Plaintiffs’ maximum possible recoveries. As the district court recognized, an asset’s “market value is the price at which [it] would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of relevant facts.” United States v. Cartwright, 411 U.S. 546, 551, 93 S.Ct. 1713, 36 L.Ed.2d 528 (1973); see also Appraisal of Real Estate, supra, at 22. The diminution of an asset’s value, then, is calculated by comparing the market value of the asset before and after a particular event. But critically, although the terrorist attacks destroyed the Leased Buildings, the relevant assets being valued in this case are Plaintiffs’ leasehold interests. In short, when the Port Authority issued leases to WTCP and 7WTCo., it split the interests in the Leased Buildings into a “leased fee estate,” which the Port Authority retained, and “leasehold estate[s]” held by Plaintiffs. See William B. Brueggeman & Jeffrey D. Fisher, Real Estate Finance and Investments 5-6 (14th ed.2011). Each estate is a distinct asset with its own market value, and it is the diminution in the value of that estate that is the measure of the owner’s loss. See id.; see also Great Atl. & Pac. Tea Co., 22 N.Y.2d at 84, 291 N.Y.S.2d 299, 238 N.E.2d 705. The market value of a leasehold estate is the price at which the lease — rather than the physical property in the estate — would change hands between a willing buyer and a willing seller in a competitive market. Put differently, a leasehold interest is worth what a buyer in a competitive market would be willing to pay in order to assume both the rights and the obligations associated with the lease. This value can be measured in at least two ways: through a “sales comparison approach,” which involves “comparing properties similar to the subject property,” Appraisal of Real Estate, supra, at 417, or an “income capitalization approach,” which requires analyzing expected costs and revenues from the property to generate an assessment of future income, and “capitalizing] the income into an indication of present value,” id. at 471; see also id. at 83, 291 N.Y.S.2d 299, 238 N.E.2d 705; W.O.R.C. Realty Corp. v. Bd. of Assessors, 100 A.D.3d 75, 951 N.Y.S.2d 36, 47-48 (2d Dep’t 2012) (discussing both methods of valuation in the context of income-producing property). Notably, because a leasehold interest entails expenditures (such as the obligation to pay rent), it can have either a positive or a negative market value. An example — using, for simplicity’s sake, the “sales comparison approach”— illustrates the point. Suppose a lessee rents a building for $500/month, and the market rate for renting a comparable property is $600/month. In such a scenario, the lessee’s interest has a positive market value because a buyer should be willing to pay up to $100/month to assume the lease.. See James R. MacCrate, The Valuation of Leasehold Interests, Real Estate Appraisal and Valuation Issues (June 2, 2010), https://realestatevaluation. wordpress.com/2010/06/02/the-valuation-of-leasehold-interests/ (“A positive leasehold is created when the market rent is greater than the contract rent.”). Now suppose the market rental rate for comparable spaces was $400/month — or, more relevantly for this ease, that the lessee’s property suffered damage that made it comparable to spaces renting for $400/month. Under those circumstances, no buyer would be willing to pay to assume the $500/month lease when she could rent a comparable property for $400/month. Instead, the lessee would need to pay buyers to entice them to assume the lease’s obligations, thus leading to a negative market value for the leasehold interest. See Appraisal of Real Estate, supra, at 83. As Plaintiffs’ experts explained, the district court’s evaluation of the leasehold interests did not follow traditional principles of valuation and incorrectly assumed that a leasehold interest cannot have negative value. Determining the diminution in value of Plaintiffs’ leasehold estates requires calculating the difference between the pre- and post-attack market values of those interests. For WTCP, the district court concluded that the pre-attack value of the leasehold interest was $2,805 billion and that the post-attack value was $0. Neither figure is correct. Opposing summary judgment, WTCP’s expert Sheldon Gottlieb explained that $2,805 billion “reflects only the net present value ... of rental payments that WTCP committed to make to the Port Authority,” and not the pre-attack value of the leasehold interest. J.A. 559. We agree. WTCP’s rental payments created the leasehold interest, but do not necessarily reflect the amount that a buyer in the open market would have paid to assume WTCP’s rights and obligations under the leases — the relevant inquiry when assessing the market value of a leasehold estate. Similarly, $0 is an incorrect post-attack valuation. Although WTCP could expect to receive $0 in rent from the destroyed buildings, that figure fails to account for the company’s obligation to, at a minimum, continue paying rent. Thus, as Gottlieb explained in opposition to summary judgment and Vandell reiterated, WTCP’s leasehold interests had a negative value after the attacks, and the diminution-in-value calculation must incorporate that negative market value. See J.A. 569 (Gottlieb noting that the leasehold interest had a “negative value” after the attacks); J.A. 624 (Vandell. discussing “negative fair market value”). The district court took a different approach when evaluating damages for 7WTCo. Plaintiffs’ expert, Professor Vandell, assessed the value of 7WTCo.’s leasehold interest using the income capitalization approach and determined that, immediately before September 11, 2001, it was worth $737 million. The district court adopted this figure as the pre-attack market value. But rather than assessing the post-attack value under a similar approach, the court again declared the post-attack leasehold value to be $0, leading to total losses of $737 million. Again, $0 reflects the rent that 7WTCo. could expect to receive for its destroyed building, but misstates the post-attack value of the leasehold interest because, at a minimum, it fails to account for the continued obligation to pay rent. Thus, for both WTCP and 7WTCo., the district court calculated the decline in value of their leasehold interests in a manner that is inconsistent with the established practice for valuing leasehold estates. Because this error potentially led to incorrect diminution-in-value calculations, we remand for the district court to reassess Plaintiffs’ maximum recoverable damages. Nonetheless, our conclusion that the district court incorrectly assessed the diminution in value of Plaintiffs’ leasehold interests should not be- confused with an endorsement of Plaintiffs’ damages claims nor taken to mean that Plaintiffs are necessarily entitled to a trial on damages or to a damages recovery. As to the flaws in Plaintiffs’ appraisal of damages, the district court was correct to- observe that both WTCP and 7WTCo. ignored its denial of reconstruction costs in their diminution-in-value calculations. In his reports on damages, Professor Vandell calculated the pre- and post-attack values of Plaintiffs’ leasehold interests by estimating the expected income and expenses associated with those interests — in other words, by using the “income capitalization approach.” As Plaintiffs acknowledge in their brief on appeal, Professor Vandell’s assessments include, as part of the post-attack valuations, reconstruction costs, tenant improvement allowances, leasing commissions, and projected capital expenditures — all of which are costs associated with replacing the Leased Buildings. See Appellants’ Br. at 69 n.44. To be consistent with the denial of reconstruction costs, the post-attack leasehold value should reflect only those continuing obligations that are unrelated to reconstruction, such as rental payments. In other words, the post-attack valuation should operate under the hypothetical that the Leased Buildings were not rebuilt. It is also significant that WTCP signed its lease agreements shortly before the terrorist attacks. The district court was correct to observe that market value often reflects expected profits. Indeed, both this Court and New York courts agree that “[mjarket value damages are ‘based on future profits as estimated by potential buyers who form the “market,” ’ and ‘reflect the buyer’s discount for the fact that the profits would be postponed and ... uncertain.’ ” Schonfeld v. Hilliard, 218 F.3d 164, 176 (2d Cir.2000) (quoting 1 Dobbs, supra, § 3.3(7)); see Sandoro v. Harlem-Genesee MM. & Nursery, Inc., 105 A.D.2d 1103, 482 N.Y.S.2d 165, 167 (3d Dep’t 1984). When there is “a recent sale price for the subject asset, negotiated by parties at arm’s length,” that price may be the “best evidence” of the asset’s “market value,” taking into account expected profits. Schonfeld, 218 F.3d at 178 (internal quotation marks omitted); see W.T. Grant Co. v. Srogi, 52 N.Y.2d 496, 511, 438 N.Y.S.2d 761, 420 N.E.2d 953 (1981). As a result, WTCP is incorrect to state that it was “entitled to a reasonable rate of return” above the rent it agreed to pay. Appellants’ Br. at 72. Purchasing a commercial leasehold interest, like any other business venture, entails risk. The fact that WTCP agreed to pay $2.805 billion in rent just months before the attack may be evidence that the pre-attack value of its leasehold interest was $0. That is, if WTCP was the highest bidder in a competitive market for the Leased Buildings, no other buyer would have been willing to pay WTCP to assume the leasehold interest. See Schonfeld, 218 F.3d at 176; J.A. 632 (“[F]air market value represents the amount an investor ... would be willing to pay for an assignment of the Net Leases.... ”). On the other hand, WTCP contends that the pre-attack value of its leasehold interest was $1,459 billion, relying in part on “increases in market rents and net operating income levels that were reasonably expected when management of the space ... was transferred ... to an experienced manager such as WTCP.” J.A. 633. The district court recognized that the market value of the leaseholds may have changed between April 2001, when WTCP acquired the Main Site 'Leases, and September 2001, immediately prior to the destruction of the properties, and it provided WTCP an opportunity to raise a material issue of fact as to whether this had occurred. We leave it to the district court to decide, in the first instance, whether there' is a genuine dispute of material fact about whether WTCP’s pre-attack leasehold interests had positive value, using the principles outlined here. But it is emphatically not the case that Plaintiffs are entitled to damages that reflect a guaranteed profit on their leases. In sum, our decision is a narrow one. We agree with the district court’s decision that Plaintiffs can recover only for the diminution in the value of their leasehold interests, and are not entitled to reconstruction costs or the claimed consequential damages. Nonetheless, we conclude that, as Plaintiffs’ experts opined in their reports, the district court’s evaluation of WTCP and 7WTCo.’s losses departed from established methods of valuing leasehold estates. Accordingly, we remand as to the August 30, 2004 and December 5, 2012 orders establishing the diminution in value of Plaintiffs’ leasehold interests. On remand, the district court should reassess the diminution in value of those leasehold estates by considering their pre- and post-attack market values, with the post-attack values measured as if the Leased Buildings were not reconstructed. The district court is free to decide, in the first instance, whether additional discovery is needed before another set of summary judgment motions or a trial on the issue of damages. B. Collateral Offset Because we agree with the district court that WTCP and TWTCo. can recover only for the diminution in value of their leasehold interests, we must address the second pillar of the decision below: the conclusion that Plaintiffs’ insurance recoveries should reduce the amount of their potential tort award. “In most jurisdictions[,] the damages recoverable for a wrong are not diminished by the fact that the party injured has been wholly or p